[Senate Hearing 111-6]
[From the U.S. Government Publishing Office]
S. Hrg. 111-6
RENEWABLE ELECTRICITY
=======================================================================
HEARING
before the
COMMITTEE ON
ENERGY AND NATURAL RESOURCES
UNITED STATES SENATE
ONE HUNDRED ELEVENTH CONGRESS
FIRST SESSION
TO
RECEIVE TESTIMONY ON A MAJORITY STAFF DRAFT FOR A RENEWABLE ELECTRICITY
STANDARD PROPOSAL
__________
FEBRUARY 10, 2009
Printed for the use of the
Committee on Energy and Natural Resources
----------
U.S. GOVERNMENT PRINTING OFFICE
48-193 PDF WASHINGTON : 2009
For sale by the Superintendent of Documents, U.S. Government Printing
Office Internet: bookstore.gpo.gov Phone: toll free (866) 512-1800;
DC area (202) 512-1800 Fax: (202) 512-2104 Mail: Stop IDCC,
Washington, DC 20402-0001
COMMITTEE ON ENERGY AND NATURAL RESOURCES
JEFF BINGAMAN, New Mexico, Chairman
BYRON L. DORGAN, North Dakota LISA MURKOWSKI, Alaska
RON WYDEN, Oregon RICHARD BURR, North Carolina
TIM JOHNSON, South Dakota JOHN BARRASSO, Wyoming
MARY L. LANDRIEU, Louisiana SAM BROWNBACK, Kansas
MARIA CANTWELL, Washington JAMES E. RISCH, Idaho
ROBERT MENENDEZ, New Jersey JOHN McCAIN, Arizona
BLANCHE L. LINCOLN, Arkansas ROBERT F. BENNETT, Utah
BERNARD SANDERS, Vermont JIM BUNNING, Kentucky
EVAN BAYH, Indiana JEFF SESSIONS, Alabama
DEBBIE STABENOW, Michigan BOB CORKER, Tennessee
MARK UDALL, Colorado
JEANNE SHAHEEN, New Hampshire
Robert M. Simon, Staff Director
Sam E. Fowler, Chief Counsel
McKie Campbell, Republican Staff Director
Karen K. Billups, Republican Chief Counsel
C O N T E N T S
----------
STATEMENTS
Page
Bingaman, Hon. Jeff, U.S. Senator From New Mexico................ 1
Furman, Don, Senior Vice President for Business Development,
Transmission and Policy, Iberdrola Renewables, Inc., Portland,
OR............................................................. 10
Izzo, Ralph, President, Chairman and CEO, Public Service
Enterprise Group, Inc., Newark, NJ............................. 6
Jones, Scott P., Executive Vice President, Forest Landowners
Association, Atlanta, GA....................................... 21
Lave, Lester B., University Professor, Higgins Professor of
Economics & Professor of Engineering & Public Policy, Carnegie
Mellon University, Pittsburgh, PA.............................. 27
Murkowski, Hon. Lisa, U.S. Senator From Alaska................... 3
Wright, David A., Chairman, Southeastern Association of
Regulatory Utility Commissioners, Columbia, SC................. 15
APPENDIXES
Appendix I
Responses to additional questions................................ 61
Appendix II
Additional material submitted for the record..................... 95
RENEWABLE ELECTRICITY
----------
TUESDAY, FEBRUARY 10, 2009
U.S. Senate,
Committee on Energy and Natural Resources,
Washington, DC.
The committee met, pursuant to notice, at 10:03 a.m. in
room SD-366, Dirksen Senate Office Building, Hon. Jeff
Bingaman, chairman, presiding.
OPENING STATEMENT OF HON. JEFF BINGAMAN, U.S. SENATOR FROM NEW
MEXICO
The Chairman. OK, why don't we go ahead with the hearing.
During the past four Congresses, we have passed a
requirement that utilities provide a specific percentage of
their electricity from renewable resources, again and again. In
the 107th and the 108th and the 109th Congresses, we passed
such provision in the Senate, but the House would not accept
it. In the 110th Congress, the House passed it, but we could
not get a vote on it here in the Senate.
My own view is, it's time that we finally pass this
provision in both houses and include it in legislation that we
send to the President. It is one of the President's highest
priorities.
The provision that the hearing is on today is a majority
staff draft. It's similar, as to its mechanics, to the
provisions that we have passed before, but it does have some
significant differences. First, the requirement is raised from
15 percent by 2020 to 20 percent by 2021. Second, the resources
that can be used to comply with the requirement have expanded;
up to one-quarter of the requirement can come from energy
efficiency. We've also included a new hydro--included new
hydropower at existing dams that currently do not have
generation.
The reasons to pass such provision are as compelling as
ever. In my view, the renewable standard can reduce our
dependence on fossil fuel sources, can reduce emissions of
greenhouse gases and other pollutants. Another effect of this
reduction is to cause a reduction in the price of the fossil
fuels that are displaced. Such a standard diversifies our
resource base, lessening the effect of supply disruptions on--
or shortages, creating greater economic stability. It reduces
our dependence on foreign sources of energy and creates greater
energy security. This standard would also spur the development
of a national green energy economy, creating hundreds of
thousands jobs, many of them in rural areas.
Over the years, we've seen many economic analyses of the
renewable standards that have been proposed. All of these
analyses, that have been done by independent analysts, conclude
that the cost of implementing the standard ranged from
negligible to positive, with many showing significant
reductions in the overall cost of energy to Americans. When you
add the fact that we're going to do something to put a price on
carbon emissions--and I hope we are able to do that, probably
through a cap-and-trade system--you have to know that the cost
of whatever we do to reduce carbon emissions will be greatly
reduced by a significant spur to the renewable generation of
electricity, such as in a renewable electricity standard.
I think that the votes are present in the Senate to pass a
renewable electricity standard. I think they're present in the
House, as well. I think that we need to get on with figuring
out the precise provisions of that legislation. I hope to work
closely with Senator Murkowski and other members of the
committee on this job. The witnesses here today can help us
greatly in that process. I look forward to hearing their
testimony.
[The prepared statements of Senators Mark Udall and Burr
follow:]
Prepared Statement of Hon. Mark Udall, U.S. Senator From Colorado
Mr. Chairman, I would like to thank you for holding today's hearing
on this important topic.
Establishing a national Renewable Electricity Standard (RES) is
something that I've been working on my entire career in public service.
In 1997, as a Colorado state legislator, I introduced several bills
designed to advance renewable energy, including a state renewable
portfolio standard. While my bills were voted down in committee and
never reached the full House floor, my work in the Colorado House laid
the path for action.
In 2004, I traveled across Colorado with the state House Speaker,
Republican Lola Spradley, campaigning for the nation's first statewide
RES ballot measure. Colorado voters approved Amendment 37, which
required 10% renewable energy production for the state by 2015.
The Colorado legislature has since increased this RES to 20% by
2020.
I continued this work at a national level after being elected to
the U.S. House of Representatives. In 2003, along with my cousin, then-
Congressman and now-Senator Tom Udall, I introduced a bill to create a
national RES. This bill became the basis for the RES amendment that
passed the House in 2007. This amendment would have created an RES of
15% by 2020.
An RES is important for so many reasons. As demand for energy
continues to grow in this country, we need to make sure that we
continue to have affordable and reliable supplies. And, most
importantly, as we move to more competition in the delivery of
electricity, we must make sure that the environment and consumers are
protected.
So it makes sense to put incentives in place to ensure that less
polluting and environmentally friendly sources of energy can find their
way into the marketplace. And that's what a renewable electricity
standard, or RES, would help to do.
But it's not just about doing the right thing for the environment.
With almost all new electricity generation during the last decade
fueled by natural gas, our domestic supply cannot sustain our needs.
Iran, Russia, and Qatar together hold 58 percent of the world's natural
gas reserves. As demand for power continues to grow, we shouldn't be
forced to rely on these unstable regions to sustain our economy, nor do
we have to.
The best way to decrease our vulnerability and dependence on
foreign energy sources is to diversify our energy portfolio. Half of
the States in our great Union have already figured this out and have
made the commitment to producing a percentage of their electricity
using renewable energy. But all of our States will benefit under a
national standard, which will bring natural gas costs down nationwide,
create new economies of scale in manufacturing and installation, and
offer greater predictability to long-term investors.
By reducing the cost of new clean technologies and making them more
available, it will help restrain natural gas price increases by
creating more competition for those fuels.
An RES will spur economic development in the form of billions of
dollars in new capital investment and in new property tax revenues for
local communities, and millions of dollars in new lease payments to
farmers and rural landowners.
Just look at what has happened in Colorado. At the time the RES
passed, Colorado had less than 1MW of solar power installed statewide.
Last year, Colorado installed over 18 MW, and there is over 40MW
installed statewide today. My state is very much ahead of schedule to
meet the 20% by 2020 requirement--half of the solar requirement for the
full 2020 period has been met in the first four years.
Not only has that meant cleaner energy for Coloradans, but also
more jobs. A major wind turbine supplier, Vestas, identified our state
RES as a determining factor in locating 2,500 jobs to Colorado for its
manufacturing headquarters for wind turbines. Governor Bill Ritter's
office has estimated that just the solar component of the RES has
brought nearly 1,500 new solar jobs to Colorado.
Some have argued that a national RES would burden some regions of
the country at the expense of others. That is inaccurate--a national
RES would create public benefits for all.
The argument that the Southeast is disadvantaged by the RES--that
the Southeast has no renewable resources--ignores the plain truth. In
fact, the Southeast is one of the regions of the country that will see
the most benefit from this proposal. According to Department of
Energy's Energy Information Administration, the technology that does
best under a 15% RES is biomass. Already, 2500 megawatts of generation
come from biomass in the Southeast, and much of the waste from pulp and
paper mills is not being used to generate electricity.
In summary, a national renewable electricity standard will reduce
harmful air and water pollution, provide a sustainable, secure energy
supply now, and will create new investment, income and jobs in
communities all over the country.
A national RES would be good for the environment, good for the
economy, and good for our country. So I look forward to hearing from
our witnesses today about the Chairman's draft, which would create a
20% RES by 2021.
Thank you.
______
Prepared Statement of Hon. Richard Burr, U.S. Senator
From North Carolina
Chairman Bingaman, Ranking Member Murkowski, thank you for having
this hearing today. It is important that we examine the details of a
national renewable portfolio standard. I look forward to hearing from
our witnesses today about the benefits and goals of a national RPS.
North Carolina is the first and only southeastern state to implement a
state RPS. While the southeast region lacks in renewable resources,
North Carolina took a hard look at what the state could achieve and set
goals accordingly.
As with most programs, the devil is in the details. We must be sure
to craft a policy that utilizes all resources that achieve the goal of
reduced emissions. This includes ramping up energy efficiency measures
and perhaps including nuclear and hydropower. Over half the states in
this country already have a state RPS. We need to find a way to
incorporate these state programs into a national RPS so that we do not
unfairly penalize the good work of early adopting states. I look
forward to working with the committee to draft legislation that meets
the goals of a national RPS while taking into consideration regional
differences.
While I look forward to the testimony from the witnesses this
morning, I am disappointed that we do not have an Administration
witness to explain how an RPS would be implemented at the federal
level. It is my hope that Chairman Bingaman will be able to schedule a
second hearing on this issue so that we might be able to hear from the
Administration.
Thank you, Mr. Chairman.
Before introducing our witnesses, let me call on Senator
Murkowski for her statement.
STATEMENT OF HON. LISA MURKOWSKI, U.S. SENATOR
FROM ALASKA
Senator Murkowski. Thank you, Mr. Chairman. I want to thank
you for holding the hearing today. I want to welcome some of
our new members that have not joined us on the Republican side
before today. Welcome to you all.
This is the first in a series of hearings that the Energy
Committee will conduct as we work to craft our third
comprehensive energy bill. We recognize that we don't have any
administration witnesses before us today. I would like to thank
you, Mr. Chairman, for agreeing to hold a second hearing,
regarding the issue of the RPS, to provide the Department of
Energy and perhaps FERC, the opportunity to can explain how
this complicated program should be implemented if we do move
forward. I would also like to hear from another panel of
stakeholders at that time.
I do know that this is an important issue for you, Mr.
Chairman. You have been a champion on the national renewable
portfolio standard. This was a new approach in the 107th
Congress, when we first began considering renewable energy
requirements for utilities. At that time, there was just a
handful of States that had such programs. Today, we have got 29
States, including the District of Columbia, who have fashioned
their own renewable energy programs.
States are in a better position, I believe, than Congress
to determine what resources and what timetables work best for
them. A one-size-fits-all national standard raises some serious
concerns about regional disparities. We recognize that there
are some parts of our Nation that are blessed with abundant
renewable resources; others, particularly in the Southeast,
lack the renewable resources, perhaps other than biomass, that
would be needed to reach a 20-percent requirement.
I think we need to ask ourselves what are we trying to
achieve with this program? Is our aim simply to increase
renewable energy production, or is the goal to reduce
greenhouse gas emissions? If the latter is true, it would seem
to me that additional noncarbon-emitting technologies should be
included. Now, some point out that choosing specific
technologies actually conflicts with the goals for a market-
based carbon-reduction program such as cap-and-trade. I think
that one issue that people have reached consensus is that the
RPS, as drafted, is not a climate-change solution.
I do not think that we can consider RPS in a vacuum. We
know that our existing transmission network is inadequate to
support our environmental goals. If the necessary transmission
is not put in place--and that means dealing with the siting
issues, the permitting, the cost allocation issues--if the
necessary transmission isn't there, it is impossible to reach
the new Federal mandate, and the customer will end up paying
the cost of noncompliance.
I think we all agree that we have to find ways to power our
lives, that are cleaner, more efficient, and more
environmentally protective. Certainly at this time we must do
it in ways that help our economy.
As we move forward, we must consider whether the RPS is the
right policy at this time or whether perhaps it has been
overtaken by the need to address climate change issues. If
Congress chooses to impose the national standards, how can we
make this work for all parts of the country? How do we handle
the existing State programs that are already in place? How do
we deal with the transmission impediments? What about the
costs? I think, in this time of economic crisis, we can't be
asking people to choose between something as basic as energy
and putting food on the table.
I thank you, Mr. Chairman, for the opportunity to have the
first of these hearings. I think we'll get some good
discussion, put some real meat on the bones of the issue. I
look forward to the testimony of our witnesses today and to
working with you as we move forward.
[The prepared statement of Senator Murkowski follows:]
Prepared Statement of Hon. Lisa Murkowski, U.S. Senator From Alaska
Mr. Chairman, thank you for convening this hearing today. This is
the first in a series of hearings the Energy Committee will conduct as
we work to craft the third comprehensive energy bill in as many
Congresses.
Because the Administration was unable to appear before us today,
I'd like to thank Chairman Bingaman for agreeing to hold a second
hearing on the RPS issue so the Department of Energy, and perhaps even
FERC, can explain how this complicated program should be implemented,
if enacted. I'd also like to hear from another panel of stakeholders at
that time.
I know this is an important issue for the Chairman, who has been a
long-time champion of a national Renewable Portfolio Standard. This was
a new approach when the 107th Congress first began considering a
renewable energy requirement for utilities. At that time, only a
handful of states had such programs. Today, 29 states, plus the
District of Columbia have fashioned their own renewable energy
programs.
States, of course, are in a far better position than Congress to
determine what resources and timetables work best for them. A one-size-
fits-all national standard raises serious concerns with about regional
disparities. While some parts of our nation are blessed with abundant
renewable resources others-particularly the Southeast-lack renewable
resources other than biomass needed to reach a 20% requirement. I have
a number of questions on the feasibility of the Southeast using biomass
as the sole means to meet this requirement, including the land use
needs, carbon emissions, and environmental impacts.
We need to ask ourselves what we are trying to achieve with this
program. Is our aim simply to increase renewable energy production? Or
is the goal to reduce greenhouse gas emissions?
If so, it would seem that additional non-carbon emitting
technologies should be included. Some point out that choosing specific
technologies actually conflicts with the goals for a market-based
carbon reduction program, such as cap and trade. One thing people do
agree on is that the RPS, as drafted, is not a climate change solution.
Further, we cannot consider the RPS in a vacuum. We know that our
existing transmission network is inadequate to support our
environmental goals. If the necessary transmission is not put in place-
and that means dealing with thorny siting, permitting and cost-
allocation issues-it will be impossible to reach this new federal
mandate and the customer will end up paying the cost of non-compliance.
We all agree that we must find ways to power our lives that are
cleaner, more efficient, and of course, environmentally protective. And
now we must do so in a way that helps right our economy.
So, as we go forward, we must consider whether the RPS is the right
policy at this time or has it been overtaken by the need to address
climate change issues? If Congress chooses to impose a national
standard, how can we make this work for all parts of the country? How
do we handle existing state programs? How do we deal with the
transmission impediments? And what about the costs? In this economic
crisis, we can't be asking people to choose between something as basic
as energy and putting food on the table.
I'd like to thank all of our witnesses for joining us today. I look
forward to hearing your testimony and getting your thoughts on the
issues I have outlined. Mr. Chairman, thank you again for convening
this important hearing.
The Chairman. Thank you very much.
We have five excellent witnesses today. One of our
witnesses is from New Jersey, and Senator Menendez had asked to
make that introduction.
Why don't you go ahead with that, and then I'll introduce
the others.
Senator Menendez. Thank you, Mr. Chairman, first of all,
for holding this hearing, which I think is incredibly
important, and for the privilege of introducing Dr. Ralph Izzo,
who is the chairman of the board, the president, and the CEO of
the Public Service Enterprise Group.
I didn't know you had that many titles, Ralph, so--I
didn't.
PSEG is one of the Nation's ten largest energy companies in
the Nation, and it's one of the most important subsidiaries as
New Jersey's utility. As many on the committee may already
know, New Jersey has an incredibly ambitious plan to reduce our
carbon footprint, and perhaps the centerpiece of that plan is
our State's renewable portfolio standard: 22.5 percent of New
Jersey's electricity must come from renewable sources by 2021.
We also have a specific carve-out for solar energy which
requires 2.15 percent of all electricity to come from solar.
The success New Jersey has achieved thus far from renewable
energy is just the tip of the iceberg, due, in large part, to
Dr. Izzo's commitment to help New Jersey meet its environmental
standards.
Just today, his company announced that it is seeking
approval for a new Solar 4 All Program to bring 120 megawatts
of solar power directly to communities and customers throughout
its service territory. That program will result in savings to
municipal and county budgets, it will create hundreds of new
jobs, and it will eliminate 1.7 million tons of CO2
emissions, which is the equivalent of removing nearly 310,000
cars from the road for 1 year.
So, I could go on about Dr. Izzo's other efforts, but I
think you'll hear from him. His leadership and experience in
New Jersey should serve as a model for the Nation. I think, Mr.
Chairman, only if we have energy producers and electric utility
companies working alongside policymakers can we ever hope to
achieve our shared vision of the Nation thriving on the
economic growth of green industries and a Nation free of--
independent of foreign energy sources. I really appreciate you
having Dr. Izzo here today.
The Chairman. Thank you very much.
Let me just introduce our other four witnesses, and then we
will hear from all of them before we ask questions.
Next is Don Furman, who is with Iberdrola Renewables, in
Portland, Oregon--we're very pleased to have you; Commissioner
David Wright, representing SEARUC, from Columbia, South
Carolina--thank you for being here; Scott Jones is here--
representing the Forest Landowners Association, in Atlanta; and
Professor Lester Lave is here from Carnegie Mellon University,
and has been very involved with the National Academies of
Science, in their ongoing study, which we're looking for the
results of very soon.
Dr. Izzo, why don't you start. If each of you could take 5
or 6 minutes and tell us the main points you think we need to
understand, and then we will have questions.
STATEMENT OF RALPH IZZO, PRESIDENT, CHAIRMAN AND CEO, PUBLIC
SERVICE ENTERPRISE GROUP, INC., NEWARK, NJ
Mr. Izzo. Thank you, Mr. Chairman, Senator Murkowski,
Senator Menendez, and members of the committee.
As the Senator mentioned, our family of companies
distributes electricity and natural gas to more than 2 million
customers in New Jersey, and we own and operate approximately
17,000 megawatts of electric generating capacity, primarily in
the Northeast, but also in the Mid-Atlantic and Texas.
I'm pleased to appear before you this morning to express my
strong desire to see this Congress adopt a national renewable
portfolio standard. I applaud you, Chairman Bingaman, for your
leadership on this issue over many years, and I also recognize
the leadership of my home-State Senator, Robert Menendez.
Global warming, in my opinion, is the most important
environmental challenge of our time. To avoid catastrophic
impacts from climate change, most scientists are telling us
that we must achieve carbon emission reductions of 80 percent
by 2050. To reach this target, we urgently need decisive
Federal action; not a patchwork of State and regional fixes,
but a strong, progressive national energy policy. An RPS is an
essential component of such an energy policy, because it
creates the demand for technologies that will transform the way
in which we generate electricity. As we electrify
transportation, it'll be even more important that renewable
electric generation will become fundamental to our energy
security.
Also with this policy, we will be creating jobs. We will
develop new technologies that we can export all over the world.
So, investment in renewable energy is a strategy for long-term
growth. As an investor and as a businessman, I believe the
adoption of a Federal RPS would create tremendous
opportunities.
PSEG, our company, is already beginning to invest heavily
in alternative energy. Today, as was mentioned, our utility
filed a proposal with New Jersey regulators to invest almost
$800 million in solar generation over the next 5 years. This
will include putting solar installations on brownfield sites,
low-income housing, government buildings, and over 200,000
utility poles. But, we're not stopping there. We've also
proposed, and are planning to develop, a 350-megawatt offshore
wind farm, which would be located 16 miles off the coast of
southern New Jersey. We recently created a joint venture to
develop compressed-air storage facilities that can store energy
from renewables and help make them more competitive. ``Them,''
meaning the renewables.
A Federal RPS will send clear market signals to companies
like ours to increase our investment in renewable electric
generation. In the long term, these investments will be a net
benefit to customers. In the short term, however, renewable
energy is more expensive than fossil-fuel generation. We must
be up front with consumers about these additional costs.
The most effective way to minimize costs, however, is
through a national approach. A strong national program, such as
the one being considered by this committee, will create
economies of scale and drive down production costs. Once
developers can rely upon a stable national market for renewable
energy credits, it will reduce their risk and, therefore,
reduce their cost of capital.
It is also worth noting that certain emerging renewable
technologies, such as offshore wind and solar, will need
additional Federal incentives, particularly through the tax
code. Fostering these industries is important to our long-term
climate-change strategy.
In closing, Mr. Chairman, as you know, our country faces
daunting challenges. We must dramatically reduce carbon
emissions and transform our energy economy. This, while we face
rising unemployment and an unprecedented economic crisis.
Implementing an RPS will send a clear signal to investors that
a true shift has occurred in our approach to national energy
policy. Let us encourage these types of sustainable investments
to power our way out of this economic downturn. We need to get
started now.
Mr. Chairman, I ask that my full written testimony be
entered into the record.
Thank you, and I'd be pleased to answer any questions
later.
[The prepared statement of Mr. Izzo follows:]
Prepared Statement of Ralph Izzo, President, Chairman and CEO, Public
Service Enterprise Group, Inc., Newark, NJ
Mr. Chairman, Senator Murkowski and Members of the Committee, my
name is Ralph Izzo and I am President, Chairman and CEO of Public
Service Enterprise Group. Our family of companies distributes
electricity and natural gas to more than two million utility customers
in New Jersey, and owns and operates approximately 17,000 megawatts of
electric generating capacity concentrated in the Northeast, Mid-
Atlantic and Texas.
I am pleased to appear before you this morning to express my strong
desire to see this Congress adopt a national Renewable Portfolio
Standard. I applaud you, Chairman Bingaman, for your leadership on this
issue over many years, and I also recognize the leadership of my home-
state Senator Robert Menendez.
I support a national RPS as a citizen who is deeply concerned about
climate change; as an investor who sees exciting opportunities in the
renewable sector; and as the head of a company concerned about its
customers and their ability to pay for green investments, particularly
in this economic environment.
The reports of how our climate is already changing are increasingly
alarming. Temperatures are rising, and the Arctic ice sheet and
glaciers around the world are melting even faster than anticipated.
Global warming is the most important environmental challenge of our
time. To avoid catastrophic impacts from climate change, most
scientists agree that we must achieve carbon emission reductions of 80%
by 2050. To reach this target, we urgently need decisive federal
action--not a patchwork of state and regional fixes, but a strong,
progressive national energy policy.
PSEG has advocated a three-pronged approach to reduce carbon
emissions.
Conservation through energy efficiency improvements.
Development of renewable energy resources.
And an expansion of clean, zero-and low-carbon central
station electric generation, such as nuclear power.
Putting a price on carbon with a carbon cap-and-trade program is a
crucial step toward achieving all three of these strategies. But we
need a comprehensive package of policy solutions to achieve our goals.
A federal RPS is an essential component of that package, targeted
specifically at growing America's renewable energy industry. We cannot
only focus on short-term, least-cost carbon reduction measures; we also
need to create demand for technologies that will transform the way we
generate electricity. And from an energy security perspective, it is
crucial that we decarbonize our electric generation in tandem with
efforts to electrify transportation.
With America's skilled workforce and entrepreneurial spirit, we
should be leading this charge. But today we are playing catch up with
other nations in developing renewable energy industries. A key factor
that gives those countries a competitive advantage is a clear, pro-
renewable energy policy.
With the right national policy, America can develop the world's
leading clean energy industry. We will create jobs. And we will develop
new technologies that we can export all over the world. Investment in
renewable energy is a strategy for long-term growth.
As an investor and businessman, I believe the adoption of a federal
RPS would create tremendous opportunities. PSEG is already beginning to
invest heavily in alternative energy. Today, our utility filed a
proposal with New Jersey regulators to invest almost $800 million in
solar generation over the next five years. This will include putting
solar generation on brownfields, low-income housing and government
buildings. It also will include roughly 200,000 solar installations on
top of our utility poles. This is in addition to the more than $100
million our utility is already investing in solar generation.
Our merchant renewable generating company is also developing solar,
offshore wind and other alternative energy projects. Most notable among
these is a joint venture with Deepwater Wind to build a 350 megawatt
wind generation facility roughly 17 miles off the coast of South
Jersey. This project will use a patented technology that allows us to
locate wind farms in deep water, virtually out of sight from the shore.
We also recently created a joint venture called Energy Storage and
Power to develop compressed air storage facilities that can store
energy. This technology can be paired with intermittent renewable
generation resources to make them more reliable and competitive.
Projects such as these are just the starting point of what America
must build if we are going to combat climate change and grow a robust
renewable energy industry. A national RPS will send clear market
signals to companies like PSEG to increase their investment in
renewable electric generation.
Finally, as the head of a company with over two million customers,
including the majority of New Jersey's low- and moderate-income
families, I worry about customers' ability to pay for green
investments.
In the long term, these investments will be a net benefit to
customers. In addition to reduced carbon emissions, benefits include
job creation, economic development, cleaner air and greater energy
security. Moreover, modeling by the Energy Information Administration
has shown that the renewable generation spurred by a national RPS will
likely displace older and less efficient fossil fuel plants, placing
downward pressure on fossil fuel prices and the wholesale price of
electricity. And over time, renewable technologies will become
competitive with traditional sources of generation.
In the short term, however, these investments generally increase
customer costs because today electricity from renewable generation is
more expensive than electricity from fossil fuel generation. We must be
candid with our customers about these higher costs as we emphasize the
important benefits.
The most effective way to minimize costs is through a national
approach. A federal program will create economies of scale, and it will
reduce the cost of capital once developers can rely on a stable,
national market for renewable energy credits, or RECs. I believe that
by establishing a robust national RPS program, we will begin to move
toward a single REC market as state policymakers eventually elect not
to maintain separate regional renewable energy ``currencies.''
For example, New Jersey has an RPS that must be met with renewable
energy generated within PJM, our regional electric grid. Energy from a
wind farm in Illinois may count, but energy from a wind farm in
Nebraska does not count, even though it may be a more affordable
compliance option. Once a strong federal program is in place, state
policymakers may decide that making that distinction no longer makes
sense for their ratepayers.
Of course, states will always be able to go above and beyond the
federal standard and set a higher RPS target. And states will likely
want to maintain targeted efforts to promote specific renewable
industries in their state, as New Jersey is doing with solar and
offshore wind. But with a strong national program, we will begin to see
more stability and uniformity in the market place.
Let me address a few more specifics in the latest draft RPS
legislation. The target of 20 percent by 2021 is consistent with the
target set by New Jersey. It is aggressive but achievable, and the
alternative compliance mechanism of 3 cents per kilowatt hour provides
reasonable assurance that costs will not spiral out of control ahead of
technological breakthroughs.
I also appreciate the effort to promote small distributed
generation by awarding it triple federal credits. However, by defining
distributed generation as being ``at a customer site,'' you may exclude
certain types, such as the solar panels on utility poles that we are
proposing to install. We think a small change in the definition could
address this issue.
As for the inclusion of energy efficiency as a compliance
mechanism, I believe the RPS should be used exclusively to promote
renewable energy. Investments in conservation and efficiency are
crucial, as they are currently the most affordable way to reduce carbon
emissions. But Congress should promote energy efficiency through
separate initiatives rather than allowing investment in efficiency to
displace investment in renewables. Given the steep decreases in carbon
emissions that we must make over the next 40 years, we need to pursue
both efficiency and renewables at full speed.
In addition, it is worth noting that certain emerging renewable
technologies will need additional federal incentives, particularly
through the tax code. A market driven approach like the RPS will
appropriately drive investment toward what are currently the most cost-
competitive forms of renewable generation. However, developing
promising industries, like solar and offshore wind, is an important
part of our long-term climate change solution.
Finally, as I said earlier, the development of clean, central
station power is a critical element to a coherent climate change
policy. PSEG is a nuclear company, with over half of our generation
output coming from our three nuclear units in South Jersey and a unit
we partially own in Pennsylvania. Investment in new nuclear generation
needs federal support. This should include fixing the loan guarantee
program and supporting the manufacturing of key nuclear components. But
I do not believe a federal RPS is the appropriate mechanism to provide
incentives for new nuclear generation.
In closing, Mr. Chairman, as you know, America faces daunting
challenges. We must reduce carbon emissions 80% by 2050. We must
transform our energy economy and establish America as the world's
leader in innovative and clean energy technologies. And as the Senate
considers the American Reinvestment and Recovery Act this week, we face
rising unemployment and an unprecedented economic crisis. We can begin
to address all of these challenges by implementing a strong, national
RPS program and sending a clear signal to investors that a true shift
has occurred in our approach to national energy policy. Let us
encourage sustainable investments to power our way out of this economic
downturn. The time to act is now.
The Chairman. Thank you very much. We will include
everyone's full statement in the record.
Mr. Furman, go right ahead.
STATEMENT OF DONALD N. FURMAN, SENIOR VICE PRESIDENT FOR
DEVELOPMENT, TRANSMISSION, AND POLICY, IBERDROLA RENEWABLES,
INC., PORTLAND, OR
Mr. Furman. Mr. Chairman, Senator Murkowski, and the
committee, thank you again for the opportunity to appear before
you.
I'm senior vice president of transmission development and
policy for Iberdrola Renewables. We're a United States
corporation headquartered in Portland, Oregon. We're the second
largest developer and operator of wind farms in the United
States. We're also actively developing solar and biomass
facilities. In 2008 alone, we invested over $2 billion just in
wind-generating facilities in the United States. I'm here,
obviously perhaps, to urge the support and the passage of a
national RPS.
There are three benefits that we see to a national RPS.
Depending on what's playing in the papers on any point in time,
one may surge to the front, in terms of being most important,
but they're all solid reasons for doing it.
The first one is economic. In 2008, the wind industry in
this country built 8,000 megawatts of wind--in excess of 8,000
megawatts--$17 billion invested, 35,000 jobs. That is a good,
positive thing that happened, and those effects lasted all the
way through the end of 2008 and are continuing into 2009.
The RPS has been estimated to create, if passed in its
current form as proposed, 185,000 new jobs, $66 billion in new
investment. This is all according to a study by the Union for
Concerned Scientists. So, it's an economic stimulative package
that involves investment, not just spending money on things
that won't yield a return, but on long-term investment.
The benefits are the next two reasons--the benefits of
those investments. Equally important, in my view, is national
security. If you look at the last 10 to 15 years in this
country, we have built largely natural-gas-fired generation in
order to meet our growing needs. Natural gas is a good way to
generate electricity. It's flexible. There are many benefits to
it. But, we have a limited supply. At some point, we will start
to run out of domestic supplies. Guess who owns most of the
world's natural gas? It's people who don't like us very much.
So, this is, in my view, a national security imperative, that
we find ways, and start planning for that time in the future
when our domestic supplies start to wane and we do begin to
seriously import liquified natural gas. I think it's essential
to our way of life. Energy is such an important part of our
economy, it is essential that we get ahead of that.
The third obvious benefit is environmental. This is not the
sole solution to global--to climate change and to carbon, but
it is a major component to it, and there's no reason not to get
started on it today. EIA estimates 15 percent RPS would result
in 3 billion tons of carbon reduction. That's substantial. That
is a substantial amount of carbon. UCS estimates that 20-
percent RPS would be the equivalent of taking $36 million--36
million cars off the road. So, it is a substantial part of
dealing with carbon.
There are several arguments against the RPS; we've heard
some of them already. One of them is that it's discriminatory,
in terms of regions of the country. I don't think nothing could
be further from the truth. The whole purpose of an RPS is to
create a trading system that will allow you to trade renewable
rights. The idea behind that is, essentially, to have a single
price. Everybody will pay the same price. That's an important
component. A lot has been made about wealth transfer, and I
don't think that holds water at all.
Second, higher prices. Perhaps, in the very short term.
But, an RPS, as was pointed out by Dr. Izzo, will actually
drive prices down as we achieve economies of scale. More
importantly, particularly for the wind business, which is going
to be where the bulk of the compliance comes from--wind is a
logistically driven business. If you don't--if you have high
transportation costs, if you're not manufacturing, domestically
and locally, you're going to have high costs, and that's one of
the reasons it's more expensive. An RPS will give companies the
incentives to invest in manufacturing facilities, locally.
The last argument is that it should be done by the States.
I think it's clear that results in a Balkanized system. It's a
compliance nightmare for utilities. It's very, very difficult.
In terms of the current draft, I've included in my
testimony a number of things that--including a number of maps
that demonstrate that there is renewable energy across this
country. There's substantial biomass in the Southeast, there is
a lot of ability to comply at a reasonable level.
The current draft--we've pointed out, in my written
testimony, a number of things--I would call out energy
efficiency, though, as an important thing that we think ought
to be done first. Utilities ought to start with energy
efficiency, but it ought not to be put in this bill, because it
will create an accounting nightmare.
I will conclude my remarks by noting that I testified
before this committee in favor of an RPS 4 years ago, and at
that time I was employed by--it was a different part of my
life, and I was employed by, actually, the largest coal-burning
utility west of the Mississippi. The reasons I testified for
the RPS then are the same reasons as I'm testifying now and
that I urge its support. The difference is, the urgency is far
greater.
Thank you for this opportunity to speak, and I'd ask that
my written comments be included in the record. Thank you, Mr.
Chairman, for the opportunity.
[The prepared statement of Mr. Furman follows:]
Prepared Statement of Donald N. Furman, Senior Vice President for
Development, Transmission, and Policy, Iberdrola Renewables, Inc.,
Portland, OR
Mr. Chairman, Senator Murkowski and members of the Committee, thank
you for the opportunity to appear before you today and thank you for
holding this important hearing. My name is Don Furman. I am Senior Vice
President for Development, Transmission, and Policy for Iberdrola
Renewables, Inc. Iberdrola Renewables is a U.S. corporation \1\,
headquartered in Portland, Oregon. We are America's second-largest
developer and operator of wind energy generating facilities. We also
are engaged in the development and operation of solar and biomass
generating facilities and other energy activities. In 2008, alone,
Iberdrola Renewables invested more than $2 billion in energy projects
located throughout the country.
---------------------------------------------------------------------------
\1\ Iberdrola Renewables in affiliate of Iberdrola Renovables--the
world's largest wind power generator with operations in more than 20
countries.
---------------------------------------------------------------------------
The purpose of my testimony is to urge the Congress to enact
national renewable portfolio standard (RPS) legislation. Mr. Chairman,
Iberdrola Renewables appreciates your leadership in promoting a
national RPS over the years. We would not be close to enacting this
legislation without your commitment and persistence. The time has
arrived for the House and Senate to send to the President a robust RPS
bill that will help expand the economy, protect the environment, reduce
consumer energy costs and enhance our national security.
President Obama's New Energy for America Plan calls for an RPS that
``ensures 10 percent of our electricity comes from renewable sources by
2012, and 25 percent by 2025.'' While these targets might appear
ambitious, they are certainly achievable. Last year, the Department of
Energy issued a report concluding that, if certain barriers are
eliminated, wind energy alone could provide up to 20 percent of the
nation's electricity supply by 2030. Other renewable energy
technologies including solar, biomass and geothermal also have the
potential to produce substantial amounts of electricity in the near-
term, if the proper policies are adopted.
benefits of renewable energy deployment
A national RPS, by increasing the deployment of renewable electric
generation capacity, will produce enormous economic benefits. Until
recently, renewable energy had been one of the few bright spots in the
U.S. economy. In 2008, more than 8,000 MW of wind power capacity
(accounting for 42% of all new electric capacity additions) was
installed in the United States. This activity created an additional $17
billion in investment and 35,000 jobs throughout the economy \2\--and
not just in states hosting wind farms. For example, at least three
manufacturers have announced plans to build windmill blade and turbine
manufacturing facilities in Arkansas--investing approximately $300
million and adding more than 2,000 jobs to the State's economy.
Enactment of a national RPS would be a significant boost for the
economy. According to a 2007 analysis prepared by the Union of
Concerned Scientists, a 20 percent national RPS, by itself, would
create 185,000 new jobs and generate approximately $66 billion in new
capital investment.\3\
---------------------------------------------------------------------------
\2\ ``Wind Generation Grows by Record 8,300 MW in 2008'', American
Wind Energy Association Press Release (January 27, 2009).
\3\ ``Cashing In On Clean Energy'', Union of Concerned Scientists
(July 12, 2007).
---------------------------------------------------------------------------
An increased reliance on renewable energy to power our homes and
businesses would also substantially reduce the emission of greenhouse
gases and other harmful pollutants. The Energy Information
Administration (EIA) in 2007 concluded that a 15 percent national RPS
would reduce carbon dioxide emissions by 3 billion tons.\4\ The Union
of Concerned Scientists estimates that a 20 percent RPS would amount to
the emissions reduction equivalent of removing 36.4 million cars from
the road.\5\
---------------------------------------------------------------------------
\4\ ``Impact of a 15-Percent Renewable Portfolio Standard'', Energy
Information Administration (June, 2007).
\5\ ``Cashing In On Clean Energy'', Union of Concerned Scientists
(July 12, 2007).
---------------------------------------------------------------------------
The increased deployment of renewable energy will also enhance our
national energy security. The electric generation sector in the U.S.
has become dangerously reliant on natural gas. According to the EIA,
natural gas-fired facilities are expected to account for approximately
half of all electric generation capacity additions over the next four
years.\6\ Although domestic natural gas production has risen, it is
unlikely to maintain pace with demand. This will raise gas prices and
increase our reliance on liquefied natural gas (LNG) imported from
countries that aren't necessarily friendly with the United States. In
fact, natural gas exporting countries from unstable parts of the world,
including Russia and Iran, recently held discussions aimed at forming
an OPEC-style cartel. Mr. Chairman, Americans can not afford to be
subjected to another international energy cartel. Renewable energy can
act as an important hedge--reducing overall gas demand and limiting our
reliance on natural gas imports. According to a 2007 report prepared by
Wood Mackenzie--a firm that does consulting work for the natural gas
industry--a 15 percent national RPS would reduce natural gas demand by
three bcf per day and lower U.S. natural gas prices by more than 15
percent.\7\
---------------------------------------------------------------------------
\6\ ``Planed Nameplate Capacity Additions from New Generators by
Energy Source'', Energy Information Administration (www.eia.doe.gov/
cneaf/electricity/epa/epat2p4.html).
\7\ ``The Impact of a Federal Renewable Portfolio Standard'', Wood
Mackenzie (February, 2007).
---------------------------------------------------------------------------
a national rps is urgently needed
Today, the only significant incentives for renewable energy
development are located in the tax code--the renewable production tax
credit (PTC), the solar investment tax credit (ITC) and accelerated
depreciation (MACRS). These tax incentives have been successful to a
point. However, they have also led to a substantial amount of
uncertainty that has, at times, inhibited investment in renewable
generation and blocked the development of a domestic renewable energy
manufacturing base.
The PTC, which was first enacted in 1992, has expired on three
different occasions and has neared expiration several other times. When
Congress has extended the PTC, the extensions have always been for
short time horizons. Until recently, the ITC had suffered a similarly
inconsistent history. This uncertainty has inhibited long term planning
for renewable project developers. In addition, it has limited
investment in a domestic manufacturing base. The vast majority of
renewable energy equipment is still manufactured overseas, often using
technology developed here.
The ongoing congressional debate on the economic stimulus package
over the relief necessary to enable renewable energy developers to use
existing renewable energy tax incentives illustrates the urgent need
for enactment of a national RPS. Because they operate very capital
intensive businesses, most renewable energy developers do not have
sufficient taxable incomes to directly utilize these tax incentives. As
a result, they have been forced to enter into Internal Revenue Service-
sanctioned ``tax equity partnerships'' with companies that had large
amounts of taxable income--primarily very large financial institutions.
These arrangements were grossly inefficient--Wall Street intermediaries
ended up with up to 30 percent of the value of the renewable energy tax
incentives, at the expense of renewable energy projects and consumers.
The recent collapse of a large number of financial service
companies has virtually eliminated even that avenue for renewable
energy developers to utilize the PTC, ITC and MACRS. Unless action is
taken by Congress soon, investment in new renewable energy capacity in
2009 and 2010 is expected to decline dramatically--costing upwards of
100,000 jobs. The renewable energy industry is hopeful that the
economic stimulus bill will provide some temporary relief to enable
renewable energy developers to monetize renewable energy tax
incentives.
This, of course, begs the question: why are we using an inefficient
tax policy to accomplish a goal that is critical to our security and of
strategic important to our future as a nation? A national RPS will
provide a simple, direct signal to the market place that will drive
renewable energy development and eventually obviate the need for the
PTC. By establishing a market for renewable energy over a reasonable
period, a national RPS would provide the long-term certainty that is
essential for developing a vibrant domestic renewable energy industry.
opponents' arguments are unconvincing
Mr. Chairman, we are encouraged that the concept of a national RPS
is growing in popularity, even among electric utilities. On January 30,
nine publicly-owned and investor-owned utilities (representing diverse
regions and generation sources) were among a group of companies that
signed a letter to President Obama's Chief of Staff urging the
enactment of national RPS. There remain, however, a number of opponents
that continue to make the same tired, old arguments, no matter how many
times they are refuted. These arguments are pure sophistry.
First, critics argue that a national RPS will discriminate against
states that don't have substantial wind power resources. However, this
ignores the fact that a variety of renewable technologies would be
eligible for RPS compliance. As the attached maps demonstrate, each
region of the country is blessed with substantial amounts of renewable
resources. For years, opponents of a national RPS have mockingly
referred to it as a ``wind portfolio standard''. However, the EIA, in
analyzing previous national RPS proposals considered in the House and
Senate, has consistently concluded that biomass energy, not wind, would
benefit the most and that solar power would also receive a substantial
amount of renewable energy credits.\8\ EIA has also concluded that
utilities in the Southeastern U.S.--a region with limited wind power
potential--would have access to a substantial amount of renewable
energy in order to comply with a national RPS.
---------------------------------------------------------------------------
\8\ See e.g., ``Impacts of a 15-Percent Renewable Portfolio
Standard'', Energy Information Administration (June, 2007); ``Energy
and Economic Impacts of Implementing Both a 25-Percent Renewable
Portfolio Standard and a 25-Percent Renewable Fuel Standard by 2025'',
Energy Information Administration (August, 2007).
---------------------------------------------------------------------------
Utilities could also economically comply with a national RPS
through renewable energy generated in other states. For instance, a
proposed transmission expansion plan by the Southwest Power Pool is
expected to bring the Southeast significant wind power resources from
the central plains. Moreover, by establishing a national renewable
energy credit (REC) trading market and enabling utilities to comply
through the acquisition of RECs, a national RPS will ensure that the
most cost effective renewable energy facilities will be deployed. Many
of the naysayers that argue that a statute causing a utility to
purchase renewable energy or RECs associated with renewable energy
generated elsewhere somehow would amount to a regional wealth transfer,
are the same utilities that currently import large amounts of coal and
uranium mined thousands of miles away. The fact is that our nation has
always been heavily dependent on interregional transfers of energy to
ensure reliability and benefit consumers.
Second, opponents claim that a national RPS will dramatically raise
energy prices. However, the facts don't bear that out. According to
Wood Mackenzie, a 15 percent national RPS, because it significantly
reduces the demand for natural gas and thus the price of electricity
generated with gas, would cause electricity costs to decline by
approximately $240 billion over 20 years.\9\ Further, EIA's analysis of
a 15 percent national RPS proposal considered in the previous Congress
concluded that overall it would cause consumer energy costs to rise by
less than one-half of one percent over a 25 year period.\10\ Now that
EIA is forecasting higher natural gas prices over the long term, an
updated analysis will likely demonstrate greater savings.
---------------------------------------------------------------------------
\9\ ``The Impact of a Federal Renewable Portfolio Standard'', Wood
MacKenzie (February, 2007).
\10\ ``Impact of a 15-Percent Renewable Portfolio Standard'',
Energy Information Administration (June, 2007).
---------------------------------------------------------------------------
Third, some suggest that RPS programs are better left for the
states to consider and administer individually. Twenty seven states
have adopted their own renewable portfolio standard programs. These
state programs have helped create markets for renewable energy.
However, the state programs have their limitations. Some state RPS
programs are better designed than others. It is not yet clear whether
some of these state programs will actually cause much additional
renewable generation to be built. In addition, certain states have
erected barriers to renewable energy generated in other states,
eliminating the efficiencies that come from interstate trading of
renewable energy and the development of a national REC market.
Moreover, certain states are unlikely to promote the development of a
significant amount of renewable energy. A national RPS (supplemented by
state programs that exceed the national floor) is the only policy that
can ensure the development of significant amounts of renewable energy
in the most cost effective manner.
Finally, certain opponents argue that Congress should focus instead
on the adoption of a greenhouse gas cap-and-trade regime because a
national RPS would not do enough to prevent climate change. While it is
true that the RPS would not obviate the need for greenhouse gas
regulation, the fact is that it will likely take some time before a
greenhouse gas regulatory scheme actually causes a significant shift in
the electric generation resource mix. Renewable energy and energy
efficiency are the only available mechanisms for reducing emissions in
the near-term. In addition, as I have already noted, a national RPS
produces other benefits (both economic and security-related) beyond the
reduction of greenhouse gas emissions.
comments on draft rps proposal
Mr. Chairman, I would like to take a moment to comment on the draft
national RPS legislation you recently circulated. This legislation
would help promote a vibrant domestic renewable energy industry and we
urge the Committee to favorably report the bill, with some
modifications.
First, it is important that a national RPS bill contain compliance
requirements that are achievable, yet ambitious enough to lead to
greater investments in renewable energy. The draft legislation requires
utilities regulated under the provision to meet an RPS target that
begins at 4 percent in 2011 and ramps-up to 20 percent by 2021 and
remains at 20 percent through 2039. On their own, these targets may
appear to be reasonable. However, the legislation includes a number of
provisions that would have the effect of reducing overall renewable
generation levels. For instance, utilities with retail sales of less
than 4 million megawatt-hours would be exempted. In addition, utilities
would deduct sales of hydropower and power generated from municipal
solid waste before calculating the level of renewable energy required
to comply with the Act. Moreover, in some cases utilities will be able
to use energy efficiency to meet up to 25 percent of their renewable
energy requirement. Finally, distributed generation facilities that
utilize renewable resources and renewable generation located on tribal
land would be eligible for credit multipliers. Although these
provisions may be necessary to meet other public policy objectives,
they could significantly reduce the overall renewable energy target. We
urge that the RPS compliance targets be strengthened to account for
these exceptions.
The draft RPS legislation would permit utilities, if their
governors so petition, to use energy efficiency credits to comply with
up to 25 percent of their RPS obligations. Energy efficiency should
always be the first resource option for every utility and efficiency
certainly should be encouraged as much as possible. However, issuing
energy efficiency credits for ``qualified energy savings'' and
permitting those credits to be utilized for RPS compliance could be
problematic. It is very simple to determine when a kilowatt-hour of
renewable electricity is generated. It is far more complicated to
determine when an action leads to an actual reduction of energy use and
how much energy savings are actually achieved directly as a result of
that action. For instance, the energy efficiency provisions of the
draft RPS bill arguably would provide a factory owner with efficiency
credits if the owner shuts down a factory due to the economic downturn.
We believe that Congress should seek to encourage and require energy
efficiency actions outside of the context of RPS legislation.
We also believe that the funds received by the government would be
better used if they were allocated back to utilities in the proportion
those utilities submitted Federal Renewable Energy Credits in
compliance with the bill. Such a provision, which is included in the
Markey-Platts RPS bill that was recently introduced in the House, would
further encourage utility compliance with the RPS through the
generation of renewable energy and the acquisition of RECs rather than
by making an alternative compliance payment. This concept is similar to
an approach utilized in Great Britain's RPS program.
Mr. Chairman, I want to briefly address a separate, but related,
subject--electric transmission. Many sites with good wind, solar and
geothermal resources are located great distances from load centers.
Many of these sites aren't being developed because of insufficient
transmission capacity to enable the power to be transported to
consumers. Congress, by enacting, a national RPS, will help incent
utilities to build additional amounts of transmission to allow them to
access the most cost effective sources of renewable energy. However,
more needs to be done. The current patchwork of regulatory
responsibility over the planning and siting of transmission facilities
and the allocation of the costs associated with those facilities has
proven ineffective. We urge this Committee to also enact legislation
that would provide a greater role for the Federal government to address
the current regulatory impediments to the development of much needed
interstate transmission designed to access renewable energy.
Mr. Chairman, this concludes my prepared presentation.
The Chairman. Thank you very much.
Mr. Wright--Commissioner Wright, go right ahead.
STATEMENT OF DAVID A. WRIGHT, CHAIRMAN, SOUTHEASTERN
ASSOCIATION OF REGULATORY UTILITY COMMISSIONERS, COLUMBIA, SC
Mr. Wright. Thank you. My name is David Wright, and I'm a
commissioner with the South Carolina Public Service Commission.
Before I start, I'd like to thank the committee and thank the
staff, both Jean and Kelly, for the job they did in assisting
us, getting us ready on such short notice. So, thank you, and
please pass that along to them.
As regulators in the SEARUC region, we are responsible for
ensuring that retail electricity customers receive safe,
reasonably priced, reliable electric service. We believe
establishing a uniform national renewable portfolio standard
without regard to crucial regional differences will drive up
electricity costs unnecessarily, jeopardize reliability, and
divert capital needed to achieve aggressive carbon targets.
Federal policy should give States the flexibility to
promote renewable energy in a way that doesn't undercut the
higher priority of reducing carbon emissions cost-effectively.
South Carolina, for example, does not possess a wealth of
renewable energy sources, such as the abundant solar energy
that is available to States in the desert Southwest, the wind-
turbine generation available to States located in the Great
Plains, or hydro generation in the Pacific Northwest. As a
result, my State and our region must seek to encourage the
growth of research and development in the use of renewable
sources that are available and economically viable to provide
for our future needs.
During many of the earlier years covered in the discussion
draft RPS, we still have to continue our reliance on
conventional base-load-generation sources, including new
nuclear energy, to ensure that reliable, reasonably priced
electricity is available to all of our citizens.
As for solar power--with the current technology, solar has
a low capacity factor, takes significant space, and is not
always available during times of greatest need. In my State,
we've had testimony that as much as 90 percent of any wind or
solar power would have to be backed up with conventional
generation sources. Electricity consumers want power even when
the sun is not shining and the wind is not blowing.
Because the availability and cost-effectiveness of
traditional renewable energy sources vary so widely among
States and regions, the SEARUC States believe that decisions
regarding renewable energy portfolios should be left to the
States. While we do urge Congress to support renewables, if you
should decide to adopt an RPS mandate, we also ask that you
carefully craft it to be practically achievable on a State-by-
State basis. An RPS should be based on what a State can
possibly achieve if it employs its best efforts to promote
renewable generation.
Some States are truly blessed with renewable resources,
others are not. As the SEARUC region, we wish to emphasize that
the aim of Federal energy legislation should not be to transfer
wealth from one region of our Nation to another through the
enforced purchase of renewable energy credits, or RECs. A very
large concern for the SEARUC region is that the money used to
purchase the RECs and alternate compliance payments will leave
our States and our region, the very areas that need the money
most. A one-size-fits-all Federal RPS would hit consumers hard
in the Southeast, the region with the least renewable resources
and the greatest poverty. Electricity customers would have to
pay an expensive premium on top of higher costs that will come
with meeting carbon targets. For instance, in my State we have
one of the lowest income levels in the U.S., and one of the
highest unemployment levels, and many of them live in mobile
homes and other energy-inefficient housing. These low-income
households are truly unable to participate in any energy
efficiency and conservation efforts, which greatly limit our
ability to achieve the proposed RPS or conservation goals.
Because they live in energy-inefficient housing, their
consumption rate of electricity is higher, and, naturally, so
is their bill for electricity. A sad fact is, the only time
they conserve is when they're forced to, when their power is
shut off for inability to pay the bill.
This is an important reason why we believe the money in the
utility--i.e., the ratepayer--pays for RECs, and alternate
compliance payments should not leave the State. The money
should be reinvested in the State where it was paid, to develop
and implement energy efficiency programs, to help low-income
households, and to help make these renewable technologies more
affordable.
The energy policy report recently prepared and released by
our public utilities review committee concluded that renewable
resources would provide about 4 percent of South Carolina's
generation by 2027. That would leave us--if you assume that we
could get 5 percent from conservation and efficiency, it would
leave us 11 percent short of the proposed 20-percent RPS by
2020. Others in our region will face the same fate.
North Carolina is the only State in the SEARUC region that
has adopted and is operating under an RPS, a 12-and-a-half-
percent RPS by 2021, with 40 percent of that total being
allowed to come from energy efficiency. Regulators there have
told me that if the national RPS were adopted as it is proposed
in this discussion draft, the-cent kilowatt-hour alternate
compliance payment alone would more than double the current
cost to their customers.
I was taught that you should not criticize something unless
you are prepared to offer an alternative solution. With that in
mind, I would ask that you and the Congress strongly consider
doing exactly what was done in the Energy Policy Act of 2005,
when you charged public utility commissions across this Nation
with setting standards for net metering and smart metering.
Before moving forward with a national renewable portfolio
standard, first give States a chance by charging those State
public utility commissions across this Nation who do not have a
renewable portfolio standard in place with creating such a
standard. Like EPAct 2005 legislation, give commissions a
deadline to get it done and in place. I know your goal is not
to penalize anyone. Please move slowly on this issue and
consider my suggestion to allow States to adopt and address
their standards.
Thank you for your time today, and it's truly an honor to
be here.
[The prepared statement of Mr. Wright follows:]
Prepared Statement of David A. Wright, Chairman, Southeastern,
Association of Regulatory Utility Commissioners, Columbia, SC
Good Morning. I am honored to have the opportunity to appear before
this distinguished Committee today to present testimony before you as
you wrestle with this difficult issue.
My name is David Wright. I am a legislatively elected Commissioner
of the South Carolina Public Service Commission. I am here today as
Chairman of the ten member states that comprise the Southeastern
Association of Regulatory Utility Commissioners (SEARUC), a regional
association of the National Association of Regulatory Utility
Commissioners (NARUC). I am also representing my state commission and
myself as a South Carolina Commissioner.
As regulators, my fellow commissioners and I in the SEARUC region
are responsible for ensuring that retail electricity customers receive
safe, reasonably priced, reliable electric service. We are concerned
that a uniform, federal Renewable Portfolio Standard (RPS) mandate
fails to recognize that there are significant differences among the
states in terms of available and cost-effective renewable energy
resources, and that having such a standard in energy legislation will
ultimately increase consumers' electricity bills.
Establishing a uniform national RPS, without regard to crucial
regional differences, unnecessarily drives up electricity costs,
jeopardizes reliability, and diverts capital needed to achieve
aggressive carbon targets. If we are going to have renewable portfolio
standards, they should be politically sustainable, and take into
account what best efforts can achieve in each state, given its
potential for renewable energy. Federal policy should give states the
flexibility to promote renewable energy in a way that doesn't undercut
the higher priority of reducing carbon emissions cost-effectively.
Some regions of the country have unique renewable energy sources,
like geothermal. Not all states are fortunate enough to have abundant
traditional renewable energy resources, such as wind, or have them
located close enough to the load center to render them cost-effective.
The Southeast and large parts of the Midwest certainly face this
circumstance.
In particular, my state, South Carolina, does not possess a wealth
of renewable energy sources, such as the abundant solar energy that is
available to states in the Desert Southwest, the wind turbine
generation available to states located in the Great Plains, or the
hydro generation in the Pacific Northwest. As a result, my state, and
our region, must seek to encourage the growth of research and
development in the use of renewable resources that are available and
economically viable to provide for our future needs. During the earlier
years covered in the discussion draft being considered we will also
have to continue our reliance on conventional base load generation
sources including new nuclear energy to ensure that reliable,
reasonably priced, electricity is available to all of our citizens.
Even in regions of the country that do have access to wind energy,
there frequently is stiff local opposition to building huge wind
turbines, significant costs for the additional transmission needed, and
reliability concerns. As a result, some renewable wind energy projects
do not get built, while others take years to build.
As for solar power, with the current technology, it has a low
capacity factor, takes significant space, and is not always available
during times of greatest need. In my state, we have had testimony that
as much as 90% of any wind or solar power would have to be backed up
with conventional generation sources. Electricity consumers want power
even when the sun is not shining and the wind is not blowing.
Because the availability and cost-effectiveness of traditional
renewable energy resources varies so widely among states and regions,
the SEARUC states believe that decisions regarding renewable energy
portfolios should be left to the states. Renewable energy is touted as
a way to achieve energy independence, reduce green house gas emissions
and reduce our carbon footprint. All of these are admirable goals.
But what is it that the country really needs? Is it energy
independence? Is it a reduced carbon footprint? Is it greenhouse gas-
free energy? Like many, I believe it makes sense to do the best we can
to achieve all of the above. But at what price? Additionally, to remove
political influences, or the artificial `feel-good' nature a RPS might
bring, you should consider relying on sound science as you craft a
policy. By this I mean, the claims of trade groups or others who are
promoting specific renewable technologies should be proven by sound
scientific principles, using independent scientific methodology in a
transparent way. The claims should be able to proven and reproducible
others.
After so many years of not having a real national energy policy,
we're now in great danger of establishing a national policy that is
doomed to failure--with a renewables policy and climate policy at
cross-purposes. Consumers and our economy will pay a heavy price for
the unintended consequences.
While we agree with the overall goals as stated above, and urge
Congress to support renewables, we also ask that you carefully craft
any RPS mandate to be practically achievable on a state-by-state basis.
Because of the differences in availability of renewable resources, some
states' ``best efforts'' in developing renewables may produce results
much lower than those that are practically achievable in other states.
As the SEARUC region, we wish to emphasize that the aim of federal
energy legislation should not be to transfer wealth from one region of
our nation to another through the enforced purchase of Renewable Energy
Credits, or RECs.
Quite honestly, the utilities in my region will not be able to meet
the renewable portfolio standard as set forth in this legislation.
Instead, in order to achieve compliance, they will be forced to write
very large checks for the RECs, money that will come from our
ratepayers, and the money will leave our region where it is needed
most. This will be a very significant dollar amount, too.
As attachments to my testimony, I have included sources, links,
memos, articles and letters from states in the SEARUC region to support
my testimony.* Public Utility Commissions and Commissioners throughout
the SEARUC region all tell me the same thing. While all of our states
strongly support renewable and alternative energy generation, we do not
support a federally mandated one-size-fits-all Renewable Portfolio
Standard. As regulators and public officials, our statutory charge is
to ensure safe, reasonably priced, and reliable electric service. We
are concerned that a federally mandated RPS that fails to account for
differences in regional and local characteristics could increase the
cost of service for all consumers and businesses who use and pay for
electricity and could reduce reliability, while providing no incentive
for investment in our states or benefit to the customers in return for
those higher bills.
---------------------------------------------------------------------------
* The following documents listed have been retained in committee
files: Ryan H. Wiser--The Treatment of solar Elecgtricity in Renewables
Portfolio Standards; Wood Mackenzie--North America Gas & Power:
Balancing CO2 Goals with Gas & Power Market Conditions; Wood
Mackenzie--The Impact of a Federal Renewable Portfolio Standard; The
Southeastern United States Can Benefit from a National Renewable
Electricity Standard; Impacts of a 15-Percent Renewable Portfolio
Standard; Commissioner WRIGHT--Appendices A-H; Estimate by Arkansas
Electric Coops of Impact of RPS Legislation on All Arkansas Consumers;
Estimate by Arkansas Electric Coops of Impact of RPS Legislation on All
Arkansas' Electric Cooperatives; Analysis of cost of Renewables for
Arkansas; Analysis of Cost of Renewables for Arkansas' Cooperatives;
Senator Bingaman's Renewable Portfolio Standard Discussion Draft;
Sources and LINKS; Estimates by Entergy for Entergy Arkansas and All of
Arkansas Consumers; Estimate by Entergy For Entergy Utility Service
Area; RX FOR RPS: ADDRESSING THE REGIONAL DISPARITIES; Florida PSC
Response to Information Request; Letter to Senator Martinez;
Electricity Modernzation Act of 2005; Lester B. Lave--A National
Renewable Portfolio Standard; Not Practical; Letter from MARUC; Udall/
Platts RPS Amendment; NARUC's Position on Legislation Establishing a
Federal RPS Program; State of North Carolina Utilities Commission
Raleigh; North Carolina comprehensive Energy legislation key Messages;
Key Points--2007 Promote Renewables Energy and Energy Efficiency Act
Securing the Right Energy Future for North Carolina; Annual Report of
the North Carolina Utilities Commission; Net Electric Generation by
Fuel Source by SEARUC State; Robert Michaels--A Federal Renewable
Electricity Requirement What's Not to Like; National Renewable
Portfolio Standard: Smart Policy or Misguided Gesture? RPS Effect on
Arkansas' Cooperatives Annual Cost and Sales.
---------------------------------------------------------------------------
Although the states in the SEARUC region do not support a `one-
size-fits-all' national renewable portfolio standard, we do support the
growth of renewables. It is my hope that the Congress will recognize
that there are truly significant differences in the availability of
renewable resources from state to state. Some states are truly blessed.
Others are not.
I was brought up to believe that you should not criticize or
complain about something unless you were prepared to offer an
alternative or a solution.
With that in mind, I would ask you that you and the Congress
strongly consider doing exactly what was done in the Energy Policy Act
of 2005, when you charged public utility commissions across this nation
with setting standards for net metering and smart metering within a set
period of time.
I would ask that, before you move forward with a national Renewable
Portfolio Standard, you first give the states a chance by charging
those state public utility commissions across this nation that do not
already have a Renewable Portfolio Standard in place with creating such
a standard. And, like in the EPACT 2005 legislation, give our state
commissions a certain period of time to get it done and in place. Each
state's RPS should recognize its renewable resource potential and
should push for a best-achievable RPS within a given period of time. If
a utility fails to meet the state standard, a penalty or compliance
payment would have to be made to the state. That money would stay in
the state where it would be invested in renewable technology or to
developing and implementing energy efficiency programs for low-income
households living in mobile homes or other energy-inefficient housing.
Any utility that meets a state standard would be deemed to be in
compliance with any federal requirement.
North Carolina is the only state in the SEARUC region that has
adopted, and is operating under, a renewable portfolio standard. After
many studies and hearings on the subject, North Carolina adopted a
12.5% RPS by 2021 with 40 percent of that total being allowed to come
from energy efficiency. But, North Carolina also adopted a cost cap.
Regulators there have told me that if the national RPS were adopted as
it is proposed in the discussion draft being considered today, the
$0.03 cents/kwh alternate compliance payment alone would more than
double the current cost to their customers. Florida is another state
that is working through and toward a renewable energy policy. The
Florida Public Utilities Commission is currently studying the issues
and is consulting with the state legislature.
A very large concern for my state and the SEARUC region is that the
money used to purchase the REC's and alternate compliance payments will
leave our states and our region, the very areas that need the money the
most.
Let me explain why I say that. A `one-size-fits-all' federal RPS
would hit consumers hard in the Southeast, the region with the least
renewable resources and the greatest poverty. Electricity customers
would have to pay an expensive premium on top of the higher costs that
will come with meeting carbon targets.
South Carolina has one of the lowest income levels in the United
States and one of the highest unemployment levels. Our workers' average
annual salary is $27,560, compared to a national average of $33,000.
There are a significant number of households living at the poverty
level and below in South Carolina, as in much of the Southeast, and
many of them live in mobile homes or other energy-inefficient housing.
These people are proud, but they are poor.
Literacy levels are low in South Carolina, and pose a significant
obstacle to our meeting the energy efficiency component of an RPS.
Statistics indicate that South Carolina has high student dropout rates
and the majority of residents have some degree of illiteracy. South
Carolina has the 4th highest percentage of adults at Level I or 2 in
the country. More than half (56%) of our state's residents fall within
severe (Level 1) to moderate (Level 2) ranges of illiteracy (level 1 is
the lowest literacy level. Adults in this category can perform simple
tasks with text and documents, but display difficulty using certain
reading, writing, and computational skills considered necessary for
functioning in everyday life. Adults at literacy level 2 can begin to
compare and contrast but are unable to perform higher level reading and
problem solving skills.) If people cannot read or write, they will have
a difficult time comprehending information about energy efficiency and
conservation.
These low-income households are truly unable to participate in any
energy efficiency and conservation efforts, which greatly limits our
ability to achieve the proposed RPS or conservation goals. But these
people still must heat their homes. Because they live in energy-
inefficient housing, their consumption rate of electricity is higher
and, naturally, so is their bill for electricity, compared to the
figures for occupants of more well insulated energy efficient homes. A
sad fact is, the only time they `conserve' is when they are forced to:
when their power is shut off for inability to pay their bill.
South Carolina ranks 40th among in the country in median income,
and 44th in disposable income. Many of our citizens simply can't afford
weather stripping for the front door, much less energy-efficient
windows or an energy-efficient heating unit. They may want to conserve,
to make their homes energy efficient, to buy that Energy Star
refrigerator, but they can't. They have to settle for that $100 used
refrigerator, if they can afford it, or have to decide how to pay their
power bill and buy groceries for the family. This is not an
exaggeration.
A better way would be to provide incentives for the use of, or
integration of, renewable technologies into a company's existing
portfolio, instead of penalizing them, and ratepayers, for a failure to
meet an arbitrary standard.The money a utility (i.e. the ratepayer)
pays for REC's and alternate compliance payments should not leave the
state. The money should be re-invested in the state where it was paid
to develop and implement energy efficiency programs to help low-income
households, and to help make these renewable technologies more
affordable.
In the proposed national RPS, development of sources of renewable
energy would have to cost less than $0.03 cents/kWh to avoid paying the
alternate compliance payment or it would be wasted money, meaning it
would be cheaper to make the alternate compliance payment than to
develop renewables and energy efficiency technologies. In a recent
hearing before the South Carolina Public Service Commission, an witness
testified that `` . . . PV solar's cost of energy ranges from 31 cents
per kWh to over 44 cents per kWh.'' Wind resources in the South
Carolina and the Southeast that may be suitable for wind generation are
primarily located along the coast which is subject to hurricanes. No
offshore wind turbines currently exist in the United States. A proposed
offshore wind farm in Delaware recently bid to supply generation to
Delmarva Power & Light for about 13-14 cent per kWh. I do not know
whether this is a busbar cost or a delivered cost. However, I do know
that it is above the current average residential retail rate for
electricity in South Carolina which is about 10 cents per kWh.
The Energy Policy Report recently prepared and released by the
Public Utilities Review Committee concluded that renewable resources
would provide about 4% of South Carolina's generation by 2027. Assuming
that South Carolina could achieve the 5% conservation and efficiency
limit and 4% of electric generation from renewable by 2020, the
utilities in South Carolina would fall 11% short of the proposed 20%
RPS in 2020. Based on the 2007 total South Carolina generation reported
by the Energy Information Agency and the proposed 3 cents per kWh
Alternative Compliance Payment, South Carolina ratepayers would be
subject to an annual Alternative Compliance Payment of more than $270
million. This amount is in addition to the added cost of generation
from renewable resources compared to the cost of generation from
conventional resources. It is also possible that a civil penalty of 6
cents per kWh could be assessed on all or part of the 11% shortfall in
meeting the proposed RPS. From my view as a state regulatory
commissioner, there are other issues or possible unintended
consequences to consider as well. If I am to balance the needs of the
utility against the needs of the ratepayer, where is the regulatory
tipping point?
As a regulator, how am I to treat a utility, and protect the
ratepayer, in a rate proceeding when they have had to spend money to
try and meet an RPS, and had to spend additional money to pay a penalty
for not being able to meet the RPS, when what they really need is
serious baseload generation to meet customer demand for electricity and
a nuclear reactor is the least-cost generation source for them to meet
the demand? An arbitrary national Renewable Portfolio Standard will
hamper me as a regulator in being able to do the job I am charged to
do. And I say that even before mentioning anything about the economic
impact possible climate legislation or carbon legislation will have on
ratepayers. As elected representatives of your states' citizens, you
carry a heavy burden. But, your constituents trust you to do the right
thing. I have followed some of your careers very closely and I have the
honor of knowing some of you personally. I know your goal is not to
penalize anyone. Please move slowly on this issue. In the meantime,
also consider my suggestion to require the state utility commissions to
address and adopt a renewable portfolio standard before you do
something that may have serious unintended consequences.
Senators, thank you for your time today. It is truly an honor to be
here. I look forward to answering any questions that you may have,
either today or, should you prefer, in writing to the Committee in the
coming weeks.
The Chairman. Thank you for your comments.
Mr. Jones, go right ahead.
STATEMENT OF SCOTT P. JONES, EXECUTIVE VICE PRESIDENT, FOREST
LANDOWNERS ASSOCIATION, ATLANTA, GA
Mr. Jones. Chairman Bingaman and Ranking Member Murkowski,
members of the committee, thank you for the opportunity to
appear before you and speak about the implications of a
renewable electricity standard for America's family forest
owners.
Today, I will talk with you about family forest owners and
the practicalities they face in trying to hold forestlands as
forests. Specifically, will family forest owners sell wood, or
will they sell real estate? Without forestland, there can be no
forest resources, such as clean water, clean air, wildlife
habitat, and wood-based commodities.
I am Scott Jones. I'm a private forest landowner and
executive vice president of the Forest Landowners Association.
Today, 60 percent of the commercial forestland in the
United States is owned by almost 11 million private forest
landowners, and we are under increasing pressure to convert
forestland to other uses. Family forest owners need new markets
for wood, and you can help by creating renewable energy
opportunities for America. Woody biomass must include all wood
crops, in all forms and sizes. The use of woody biomass as a
renewable energy source will provide needed markets for private
forest landowners and contribute to forest health by creating
economic incentives to deter conversion of forestland to other
uses.
In a mosaic of energy sources across the U.S., we seek a
level playing field for wood, but we are concerned that
forestland may be disproportionally burdened by well-meaning,
but functionally stifling, regulation relative to other
renewable energy sources. Wood is a reliable feedstock without
the seasonal fluctuations or serendipity of weather that
inhibits some other energy sources, and the resource is
available now.
In January 1905, the New York Times headline read, ``Timber
Famine Near, Says President Roosevelt.'' The article said that,
``This country is in peril of timber famine.'' Unless the
forest can be made ready to meet the vast demands which growth
will inevitably bring, commercial disaster is inevitable.
Remember, at this time, pulpwood was nonexistent, since Charles
Herty had not yet invented the pulping process. Only when we
planted trees and encouraged markets did we end our brush with
a timber famine. The point here is, markets cured the timber
famine. Forest management for commodities did that. New markets
did not create sustainability problems, they cured them.
You may have heard that adding a new RES market to existing
markets will create an unsustainable resource. This is simply
not true. We do not have enough markets for the wood that we
are growing. 2007 Forest Service data shows 41 percent volume
grown over removal in our country. The reduction in the forest
products manufacturing not only affects the amount of wood
grown, but is a threat to the perpetuation of forest
landowners.
Traditional markets for forest commodities are moving
offshore. As fewer and fewer pulp and paper mills remain in
this country, production has remained unchanged or slightly
improved, but geographic distribution and access to these
markets have degenerated.
A few numbers to show the degeneration of the markets: 136
pulp and paper mills were closed between 1997 and 2007, and
none have been built since 1989; 331 softwood saw mills closed
in the U.S. and Canada, 1995 to 2007--and I know some in your
districts have seen some recent closures; 314 furniture plants
closed between 2000 and 2008.
The incentive for forest landowners to convert forestland
investments to residential and commercial real estate are led
by population growth of nearly 30 percent by 2030, according to
the United States Census Bureau. Projections by the Forest
Service are that 19 million acres of forestland will be
developed to other uses between 1992 and 2020 in the Southeast.
Again, I'm distinguishing between sustainable forestland,
sustainable forest resources, and note that, without the land,
there can be no resources.
In legislation and regulation, if we are truly to meet a--
renewable energy goals, wood must be allowed to make its full
contribution. Currently, 92 percent of our Nation's forestland
is natural. However, with the current definition of ``renewable
biomass'' in the renewable fuel standards at its most
restrictive, America's natural private forestlands are
excluded. That's 92 percent of our forestlands excluded from
the renewable fuel standard. This kind of policy creates
disincentives to continue to hold and manage forestlands.
Federal forest policy must address the conundrum of what will
motivate a forest landowner to continue to hold their
investment. No definition that harms capital investment in
energy facilities or takes the siting of these facilities can
benefit the future of America's forestlands. Without broad,
inclusive definitions for ``woody biomass,'' we're only
encouraging the loss of private forestlands to other uses that
are typically not as environmentally friendly.
In conclusion, we believe we can help construct an approach
that addresses concerns about environmental sideboards
without--appropriately relying on existing practices and
capabilities. However, the inclusion of a shadow Federal forest
practice act is not the purpose of a renewable portfolio
standard, or any energy bill. America's forest landowners
already operate under, and comply with, some of the most
strenuous environmental laws and regulations on the globe. With
inclusive language for wood in the renewable electricity
standard is the place--is in place, the Forest Landowners
Association will use our resources, including our grassroots
networks, to promote legislation that fairly includes the use
of wood biomass to meet our Nation's energy needs. In fact,
we've already begun working with land-based allies and the
environmentalist community in an effort to address any forest
health pressures that may arise from new energy wood markets.
I thank the chairman, ranking member, and the members of
the committee for the opportunity to have made these comments
on behalf of the Forest Landowners Association. This concludes
my remarks.
[The prepared statement of Mr. Jones follows:]
Prepared Statement of Scott P. Jones, Executive Vice President, Forest
Landowners Association, Atlanta, GA
RE: The Renewable Electricity Standard: Implications for Sustaining
Family Forests\1\
---------------------------------------------------------------------------
\1\ See the final pages for ``Points of this Testimony''
Chairman Bingaman, Ranking Member Murkowski, Members of the
Committee, thank you for the opportunity to appear before you to speak
about the implications of a Renewable Electricity Standard (RES) for
America's family forest owners. Today, I will talk with you about
nonindustrial, private forest landowners and the practicalities they
face in trying to hold forestlands as forests; that is, how will RES
markets, energy markets in general, and other market trends affect
landowner inclinations to keep forestland? More specifically, will
family forest owners sell wood or will they sell real estate? We
stipulate--throughout this testimony--that we distinguish between
forestland and forest resources. Without forestland, there can be no
forest resources: clean water, clean air, wildlife habitat, healthy
soils, aesthetics, recreation, and wood-based commodities. For example,
the state of Georgia loses roughly 219 acres of forestland every single
day to other uses.\2\
---------------------------------------------------------------------------
\2\ Harper, R.A., N. McClure, and T.G. Johnson, et al. Georgia's
Possessive Forests, 2004. U.S. Department of Agriculture, Forest
Service, Southern Research Station. Asheville, NC.
---------------------------------------------------------------------------
Many of you have spent a lot of time on this issue and we in the
forestry community appreciate it.
I am Scott P. Jones, Executive Vice President of the Forest
Landowners Association (FLA), a national association that supports and
protects the interests of private forest landowners. I am a graduate of
the University of Georgia, with a Bachelor of Science in Forest
Resources, a nationally certified forester, a Georgia Registered
Forester, and a forest landowner.
Since 1941, FLA has provided its members with education,
information, and national grassroots advocacy. FLA's outreach on behalf
of private forest landowners nationwide enhances their forestland
management practices and stewardship.
According to the USDA Forest Service's Forest Inventory and
Analysis program\3\, about 60 percent of the commercial forestland in
the U.S. is owned by almost 11 million private forest landowners (I
understand that there are about 2 million farmers in the U.S.). This
does not include manufacturers, it does not include Real Estate
Investment Trusts, and it does not include Timberland Investment and
Management Organizations\4\. It is the ``Moms and Pops''; it is us. And
we are under more pressure to convert forestland to other uses than in
any other time in history, and that pressure will increase.
---------------------------------------------------------------------------
\3\ ``Forest Landscapes in Perspective'' USDA Forest Service, p.
173
\4\ ``Forest Resources of the United States'' USDA Forest Service
---------------------------------------------------------------------------
FLA members look forward to participating in the new markets
created by developing opportunities to meet national renewable energy
requirements and we wish to do this while maintaining forest health. We
support the increased use of alternative energy feedstocks, in
particular ``woody biomass,'' to help feed our nation's needs for
energy; thereby, amongst the benefits, help to end a troubling reliance
on other countries that supply energy for our homes, for our economy,
for our people. To aid in this increased use, statutory and regulatory
definitions of woody biomass, as a full partner with other cellulosic
feedstocks, should include all wood-crops, in all forms and sizes, in
addition to residues, wastes, and byproducts of processing. The use of
woody biomass as a renewable energy source will provide new markets for
private forest landowners and, in so doing, contribute to forest health
by removing hazardous wildfire fuels, speeding recovery from natural
disasters, alleviating vegetative-competition that contributes to pest
and pathogens infestations, and creating economic incentives to deter
conversion of forestland to other uses.
Forest landowners are highly interested in the production of
alternative energy feedstocks from trees, and as segments of the forest
products industry continues to trend offshore, new markets can help to
answer the question raised about whether forest landowners will sell
trees or sell real estate.
We believe that wood is necessary to meet a Renewable Electricity
Standard. In a mosaic of energy sources, where each region of the
country produces energy from its own, best indigenous resources, we
seek a level playing field for wood. This level field-of-play will
bring the same jobs and new local tax bases to forested regions as
other regions will potentially enjoy.
Biomass, in general, has unique attributes among other renewable
energy sources. It can be burned in existing coal-fired power
production with relatively minor and inexpensive modifications, and it
can be generated whenever the biomass developer or utility chooses.
But, we have deep concern that, under developing renewable energy
markets, forestland may be disproportionately burdened by well-meaning
but functionally stifling regulation, relative to other renewable
energy sources and their land bases. Simple acknowledgements of the
impracticality of applying agricultural principles to forestry is a
small step in the right direction; for example, the seasonal-crop,
closed-loop approach to energy feedstocks just has no place in dealing
with a crop that can take decades to culture; i.e., trees. The negative
impacts of national energy policies could create harm to all family
forestlands in the U.S. Wood is a reliable feedstock, without the
seasonal fluctuations or serendipity of weather that inhibit some other
energy sources. And this resource is available now.
In January 1905, the New York Times headline read, ``TIMBER FAMINE
NEAR, SAYS PRESIDENT ROOSEVELT''. The article said that `` ` . . . this
country is in peril of a timber famine . . . ' as asserted by the
President this afternoon in an address before the American Forest
Congress. In the course of his remarks the President said: `If the
present rate of forest destruction is allowed to continue, a timber
famine is obviously inevitable. Fire, wasteful and destructive forms of
lumbering, and legitimate use are together destroying our forest
resources far more rapidly than they are being replaced . . . Unless
the forests can be made ready to meet the vast demands which . . .
growth will inevitably bring, commercial disaster is inevitable.''\5\
---------------------------------------------------------------------------
\5\ New York Times, Jan. 6,1905; http://query.nytimes.com/gst/
abstract.html?res=940DE4DE133AE733A25755C0A9679C946497D6CF
---------------------------------------------------------------------------
Here are the words straight from the Times. I think this forcefully
makes the case for sustainability. Remember, pulpwood was non-existent
when this quote was made, as Charles Herty (1867-1937) had not yet
invented the pulping process. Only when we planted trees and encouraged
markets did we end our brush with a timber famine. The destructive form
of lumbering, then, was a process that is still called ``high grading''
trees, today. Because at that time, only a high quality part of the
tree was considered valuable for lumber, and the rest of the tree was
left in the woods to rot or was burned. The point here is: markets
cured the ``timber famine''. Forest management for commodities did
that. New markets did not create sustainability problems; they cured
them.
In the United States, timber growth has exceeded the harvests since
1952. Growing-stock volume on U.S. timberland has increased 39 percent
between 1953 and 2002. That is, the nation's forest inventory accrued
more volume than it lost by mortality and harvest by over one-third.\6\
Today, you will likely hear that adding a new RES market to existing
markets will create an unsustainable resource. It is simply not true.
We do not have enough markets for the wood that we are growing, as
shown in the USDA Forest Services Resource Planning Act (RPA) data
collected by the Forest Inventory Analysis program. The 2002 data
showed that across all species in the United States, we were growing 34
percent more volume then we removed\7\. Now, with the reduction of
forest products manufacturing, we have seen an increase in the amount
of growth versus removal. The 2007 RPA data shows a 41 percent volume
grown over removal\8\. The impact of the reduction of our forest
products manufacturing is having a clear effect on the amount of wood
being grown and the threat to the health of our forests and private
forest landowners is eminent. We believe arguments to the contrary are
likely disingenuous and perhaps more motivated by competition for raw
materials and/or feedstock preferences and/or tax avoidance than
resource sustainability. The forest resource is sustainable and this
question has been asked and answered before. But, the willingness of
forest landowners to maintain forestland as forestland has had too
little attention. Federal forest policy must address the conundrum of
what would motivate a forest landowner to continue to hold that
investment when it is threatened by new and evolving forces; whether it
is opportunities for better financial returns for their families,
shrinking market access, or investment-dampening legislation and
regulation.
---------------------------------------------------------------------------
\6\ ``Report on Terms Used in Biomass Credit Legislation''
BioResource Management, Inc., Richard Schroeder May 21, 2007
\7\ 2002 Forest Resources of the United States, 2002. Gen. Tech
Rep. NC-241, Table 36
\8\ Forest Resources of the United States, 2007. Gen. Tech Rep. NC-
xxx, Table 36 (with permission from Greg Reams, National Program
Manager, F.I.A.)
---------------------------------------------------------------------------
Urbanization will have the ``most direct, immediate and permanent''
effects on southern forests of all forces of change.\9\ The incentives
for forest landowners to convert forestland investments to residential
and commercial real estate are led by population growth. U.S. Census
Bureau \10\ population growth projections between the years 2000 and
2030 are for 82.1 million new people. That is a 29.2 percent growth,
and most of that growth will be in the regions heavily dominated by
private forest ownership.\11\
---------------------------------------------------------------------------
\9\ Wear and Greis, USDA Forest Service, Southern Forest Resource
Assessment.
\10\ US Census Bureau Interim Projections Released April 2005.
\11\ Susan Stein, et. al., USDA Forest Service, ``Forest on the
Edge''.
---------------------------------------------------------------------------
How will this growth affect forestland use? We are distinguishing--
again, throughout this testimony--between sustainable forestland,
sustainable forest resources, and that without the land there can be no
resources. Nineteen million acres of forest converted to developed uses
from 1992 to 2020 in the Southeast.\12\ The need for homes, churches,
public infrastructure, and other services of 21st century human
existence will cause fragmentation of forested landscapes, which will
have its greatest impact in the Southeast,\13\ the region with the
highest concentration of family forestland, but with a lack of other
regional sources of renewable energy other than forests. And private,
family forest landowners who manage smaller tracts of land are at
greater potential for development.\14\
---------------------------------------------------------------------------
\12\ David Wear, USDA Forest Service, Southern Forest Resource
Assessment.
\13\ Susan Stein, et. al. USDA Forest Service, Forests on the Edge.
\14\ Butlerand Leatherberry, 2004. America's family forest owners.
Journal of Forestry 102 (7): 4-9.
---------------------------------------------------------------------------
Traditional markets for forest commodities are trending offshore or
are impacted by poor trade policy. For example, as fewer and fewer
pulp/paper mills remain in this country, production has remained
unchanged--or slightly improved--but, geographic distribution and
access to those markets has degenerated.
136 pulp and/or paper mills closed, 1997-2007 (none have
been built since 1989) \15\
---------------------------------------------------------------------------
\15\ American Forest & Paper Association, 2007
---------------------------------------------------------------------------
331 softwood sawmills closed in the U.S. & Canada, 1995-2007
\16\
---------------------------------------------------------------------------
\16\ USDA, Profile 2007: Softwood Sawmills in the US and Canada
---------------------------------------------------------------------------
314 furniture plants closed, 2000-2008 (hardwood indicator)
\17\
---------------------------------------------------------------------------
\17\ George Barrett, Hardwood Review
In legislation and regulation, if we are truly to meet renewable
energy goals (whether electricity or biofuels), wood must be allowed to
make its full contribution. Some well-meaning organizations want
renewable energy, but want to dictate which forests can participate.
Currently, 92 percent of our nation's private forestland is natural. In
the southeastern United States, on private lands, 88 percent of
forestland is natural. However, with the current definition of
``renewable biomass'' for the Renewable Fuels Standard of the 2007
Energy Independence and Security Act (at its most restrictive),
America's natural private forestlands are excluded from participation
in the initiative to establish a renewable fuels industry. This kind of
policy creates disincentives for private forest landowners to continue
to hold and manage their forestlands. Anecdotally, we know that this
2007 language has already resulted in acres and acres of tree removals
for conversion to other land uses. This same definition will result, we
believe, in land dedicated to fuel production at the expense of other
traditional markets.
In order to promote the continuation of sustainably managed forests
on private lands, we must encourage markets for these landowners;
voluntary markets. No definition that harms capital investment in
energy facilities or taints the siting of those facilities can benefit
the future of America's forestlands. Without broad, inclusive
definitions for woody biomass, we are only encouraging the loss of
private forestlands to other uses that typically are less
environmentally friendly.
So, our growing population leads to conversion. Fewer markets and
less market access leads to conversion. And the constraints of new laws
lead to conversion. The message is that constraints on the resource
lead to conversion of forestland to other uses. How can one argue that
disincentives to keep an investment--in this instance, privately held
forestland--improve the likelihood of it continuance or its
sustainability?
Then, it is in the best interest of all who want to maintain a
forested America to seek out incentives for forest landowners. The
highest current concern to these landowners regards the definition of
``woody biomass'' in statute and regulation. That is, woody biomass
should be defined as ``wood'' in addition to wood residues, wastes,
and/or byproducts. Ultimately, we must sustainably harvest trees as
pulpwood, sawtimber, poles, pilings, chip-n-saw, OSB, wafferboard, and
``energy-wood.'' Landowners would like to see wood as an equal partner
with grains, grasses, and all cellulosic feedstocks.
The inclusion of a ``shadow'' federal forest practices act is not
the purpose of a Renewable Portfolio Standard or any energy bill.
American forest landowners already operate under and comply with some
of the most strenuous environmental laws and regulations on the globe.
Forest practice policies are better determined at the local level to
account for differences in local conditions and needs rather than
through prescriptive, one-size-fits-all federal mandates.
In addition to reducing our dependence on traditional fuels and
their finite availability, we hope to see increased production of clean
alternative energy products; products that we are told are
environmentally cleaner than traditional products. Wood energy sources
are also renewable, abundant, and economically competitive.
An incentive-based approach, working within the market system,
would create new opportunities and incentives for forest landowners, as
segments of the forest products industry and associated markets trend
toward an offshore future and other pressures to convert amass. At this
time, 24 states and the District of Columbia have enacted laws to
require alternative energy feedstocks--Renewable Portfolio Standards--
for electric power production. A similar national commitment to
incentives for energy production from alternative feedstock would
contribute mightily to energy production and secure forestland
investments with the surety, security, and certainty of a nation
committed to long-term alternative energy production and maintaining
family forestlands. These forest lands require a long term commitment.
Most family forest landowners will only see one or two harvest in their
lifetime. America needs landowners confident in their forestland
investments, so that these owners continue to see forestland as
competitive and to deter forest conversions to other uses.
In conclusion, we believe we can help construct an approach that
addresses concerns about environmental sideboards, while appropriately
relying on existing practices and capabilities. With inclusive language
for wood in the Renewable Electricity Standard in place, the Forest
Landowners Association will use our resources, including our grassroots
networks, to promote legislation that fairly includes the use of wood
biomass to meet our nation's energy needs. In fact, we have already
begun work with land-based allies and with the environmentalist
community in an effort to address any forest health pressures that may
arise from new energy-wood markets.
Now to offer an answer to the question of whether landowners will
sell wood or sell real estate: we've got it, let's use it.
I thank the Chairman, the Ranking member, and the Members of the
Committee for the opportunity to have made these comments on behalf of
the members of the Forest Landowners Association. This concludes my
remarks. I would be glad to respond to any questions that any member of
the committee may have and, later, deliver materials and information
that may help to further clarify our position.
Points of this Testimony:
Forest Landowners Association members look forward to
participating in the new markets created by developing
opportunities to meet national renewable energy requirements
and we wish to do this while maintaining forest health.
New markets for forest landowners will help sustain
forestland and curtail conversions.
FLA opposes the creation of a federal forest practices and/
or land-use act.
FLA is prepared to help craft good legislation.
Trees are an abundant, sustainable, renewable, and reliable
energy source.
A few are using an argument of ``threat to sustainability,''
which we believe disingenuous and perhaps more motivated by
competition for raw materials and/or feedstock preferences and/
or tax avoidance.
Wood is necessary to meet the standard.
FLA is prepared to help pass well-crafted legislation.
Make wood an equal partner with other cellulosic feedstocks
and the lands producing them.
FLA is currently working with allies, including the
environmentalist community, to address any forest health
pressures that may arise from this new market.
The Chairman. Thank you very much.
Dr. Lave, go right ahead.
STATEMENT OF LESTER B. LAVE, UNIVERSITY PROFESSOR, HIGGINS
PROFESSOR OF ECONOMICS & PROFESSOR OF ENGINEERING & PUBLIC
POLICY, CARNEGIE MELLON UNIVERSITY, PITTSBURGH, PA
Mr. Lave. Chairman Bingaman, Ranking Member Murkowski, and
members of the committee, thank you for giving me the
opportunity to testify on this important legislation.
At Carnegie Mellon University, I'm a senior professor in
the Business Engineering and H. John Heinz Colleges. Granger
Morgan and I direct the Electricity Industry Center, and I'm
director of the Green Design Institute. I have the privilege of
serving on two National Academy of Sciences Committees that
Chairman Bingaman requested to take a look at America's energy
future. The opinions here are strictly my own.
Chairman Bingaman, as I listened to your remarks, to the
remarks of Senator Murkowski and Senator Menendez, as I've
listened to the remarks of the other people here, I heard a lot
of goodwill. I heard people of goodwill who are trying to solve
a problem. So, I think we're agreeing on what the goals are.
I'm here to try and testify on how to achieve those goals in
the smartest possible way with the least disruption.
I think that the legislation here is good legislation in
pushing us in this direction, but I would recommend two changes
to it.
The first is, I think that the definition of ``efficiency''
is not quite as tight as it should be. I think it ought to be
tightened. Then, after that, I don't see a reason to restrict
how much efficiency can contribute to this.
The second is, as we've been hearing from other people, I'm
most concerned about carbon dioxide emissions when we talk
about electricity, and I think that's what our focus ought to
be.
In doing that, I think that we ought to avoid the mistakes
that we made in the 1970s, which is to have either Congress or
the Department of Energy choose the winning technologies. I
think that we need to let the engineers and entrepreneurs find
out what are the winning technologies, whatever they might be,
in contrast to what happened in the 1970s; the winning
technologies turned out to not be the ones that people were
sure would actually turn out.
I praise your emphasis on efficiency in the legislation.
It's clearly our cheapest energy resource. I praise your
support of distributed generation and combined heat and power.
I agree that, in the long run, renewables will provide our
energy. But, I think that we have to be careful not to pick the
technology that we think is going to win. I think that we ought
to be trying to face the issues more directly.
So, let me start off with carbon dioxide. The world has
about 5 billion tons of fossil fuels. We've burned about 6
percent of that. If we were to burn any substantial portion of
that without carbon capture and sequestration, we would
certainly have major global climate change. In order to avoid
that, I think it is necessary, not just to take a look at a 15-
or 20- or even 30-percent renewable portfolio standard, we need
to address carbon. It's--if you had a 20-percent renewable
portfolio standard, that would still leave 80 percent of the
electricity that could be generating CO2 and causing
other problems. So, it's not that I'm arguing that we ought to
have a higher standard, it is that we ought to be addressing
that problem most directly.
I distributed some maps of wind and solar resources. There
have been some good comments on wind, so I will not talk about
that, but let me talk about the solar stuff. Again, I'm trying
to talk about how to achieve our goals in the smartest, most
cost-effective way.
When you look at those maps, Senator Bingaman, your State
comes out really well. The desert Southwest does very well on
this. As you get further north and as you get further east, the
solar resource goes down. So, I love solar, but if you're
trying to do solar in a place that doesn't have very many solar
resources, then you're going to wind up demonstrating that
we're doing something that is expensive and doesn't make a lot
of sense. So, again, I praise you for not having a solar set-
aside here, but I think that, when we think about this, we
ought to be thinking about it in a hardheaded way, not just in
terms of what it is that we think ought to be very good.
So, in my written testimony, I've emphasized what are some
of the difficulties of having renewable resources. I don't mean
that in a mean-spirited way; I mean that those are really the
difficulties that we have to overcome.
So, just finally here, Senator Bingaman, I commend you for
this important legislation. I want to emphasize that we want to
have as much flexibility as possible. So, I have two
recommendations. One is to tighten the definition of
``efficiency'' and let it contribute much more to the standard.
The second is to focus on reducing carbon dioxide rather than
singling out renewables as the answer.
Thank you very much for the opportunity to testify, and I'd
be happy to answer any questions.
[The prepared statement of Mr. Lave follows:]
Prepared Statement of Lester B. Lave, University Professor, Higgins
Professor of Economics & Professor of Engineering & Public Policy,
Carnegie Mellon University, Pittsburgh, PA
Chairman Bingaman, Ranking Member Murkowski, and members of this
committee. Thank you for giving me the opportunity to testify on this
important legislation.
At Carnegie Mellon University, I am a senior faculty member in the
Business, Engineering, and H. John Heinz colleges. Granger Morgan and I
direct the Electricity Industry Center and I am director of the
Director Green Design Institute. I have the privilege of serving on two
National Academy of Sciences committee studying energy issues. The
opinions here are mine and do not necessarily reflect the views of my
coauthors, Carnegie Mellon University, or any other institution.
I praise the draft legislation and recommend that you:
1. Tighten the definition of efficiency and eliminate the
limit on its contribution. This will allow regions that don't
have good wind and solar resources to meet the legislative
goals at lower cost.
2. Focus on reducing carbon-dioxide emissions rather than
singling out renewables as the answer. There are significant
savings from letting all technologies compete in satisfying the
goals of lowering greenhouse gas emissions, increasing
environmental quality more generally, increasing energy
security, and improving sustainability,
I commend you for Title VIII-Renewable Portfolio Standard. The
basic approach is sound and well thought out. I share your goals of
reducing greenhouse gas emissions, improving environmental quality more
generally, making our energy supply more sustainable, enhancing energy
security, and of ensuring that energy prices are not so high that they
derail the economy or prevent Americans from living well. I praise your
emphasis on efficiency, our cheapest energy ``resource'' and your
support of distributed generation and combined heat and power. I agree
that in the long term, renewable fuels will likely provide our energy.
Finally, I commend you for generally trying to eschew picking the
winning technologies. Let engineers and entrepreneurs find the best way
of meeting the goals.
Unfortunately, there are significant difficulties and costs in
implementing a federal RPS. While the industry struggles to meet your
goal of a 20% RPS by 2039, 80% of generation could be emitting carbon-
dioxide, polluting the air and water, and using imported oil and
natural gas. My point is not that the RPS should be higher, but rather
that the legislation should address the issues directly.
My greatest concern for electricity generation is abating carbon-
dioxide emissions. Without controls, we will run out of atmosphere
before we run out of fossil fuels. The world has 5,000 billion tons of
fossil fuels, of which we have used only 6%. Burning any appreciable
fraction of the coal, oil, and natural gas resources will send
atmospheric carbon dioxide concentrations to far greater levels than
humans have experienced and lead to major global climate change. Global
climate change, not our stock of fossil fuels limits how much
electricity we can generate from these fuels.
A carbon portfolio standard (CPS) would address this concern
directly and more effectively. The available renewables technologies
have quite different carbon emissions; giving equal credit to all
doesn't make sense. Other technologies also have low carbon emissions
and should receive attention.
The maps I have provided of wind and solar resources show vast
differences among states. For example, the Southeast has neither good
wind nor solar resources. It does have biomass, but that will be needed
for producing liquid fuels. The legislation should give each region the
greatest flexibility to achieve the goals at least cost, including
focusing on renewables or conservation, fossil fuels with carbon
capture and sequestration (CCS), and nuclear.
I emphasize efficiency since it has no emissions of air or water
pollution, no greenhouse gas emissions, and does not harm the
environment. After tightening the definition of efficiency in the draft
legislation, I see no reason to limit efficiency's contribution to 25%.
The efficiency definition should include distributed generation and
combined heat and power, since their virtue stems from increased
efficiency, not merely from having such a program. The energy
efficiency accomplishments in states, such as California and New York,
show a vast potential for efficiency, one greater than the likely
contribution of renewables. Electricity use per capita in these two
states is 40% less than the national average, twice the RPS goal for
2039. I recommend aggressive goals for energy efficiency, particularly
in regions such as the Southeast that have poor wind and solar
resources.
Achieving the increases mandated in the bill requires building
large amounts of transmission from areas with good wind resources to
population centers. Many people like wind turbines in the abstract but
don't want them as neighbors, for example, the proposed wind farm off
Cape Cod. More people oppose transmission lines. If the wind farms and
transmission lines can be sited, there are likely to be delays of ten
years or more, particularly for transmission.
Trading renewable credits will be limited by the combination of
transmission constraints and the fact that the best wind resources are
located far from population centers. If the excellent wind resources in
the upper Midwest and Rocky Mountains cannot be exported, the local
populations could use only a small proportion of the generation
potential.
For large amounts of wind and solar to enter the grid, there must
be inexpensive bulk storage of electricity. R&D into technologies such
as compressed air is needed. Until bulk storage is possible,
integrating more than 15% wind and solar power into the system will be
costly and could compromise reliability.
I now summarize the difficulty of integrating large amount of wind
and solar energy into the electricity grid.
As you know, wind and solar generation differ from the traditional
ways of generating electricity because they are generally not available
when we need power. Wind turbines and solar arrays generate electricity
when the wind blows and the sun shines. One of the best solar sites in
the USA is in the Sonora Desert in Arizona. A very large solar site
there had a capacity factor of 19%, out of the possible 100%, if it had
generated full power every hour of the year. Wind turbines have higher
potential in good wind sites but, for example, the average capacity
factor for the wind turbines in Texas was only 26% in 2006.
The solar map shows that the good sites are in the desert
Southwest. Sites in the Southeast have lower potential because of cloud
cover. The rest of the continental USA has much lower potential for
generating solar power, particularly the most heavily populated areas.
The capacity factor is important because almost all the costs are in
manufacturing and installing the array. Thus, a solar array with a
capacity factor of 20% would produce electricity at half the cost of an
array with a capacity factor of 10%. Forcing solar installations into
the areas where most Americans reside would consume a vast amount of
resources per kilowatt-hour.
Nature is more generous in distributing good wind sites around the
nation, but they are still distant from population centers. In
particular, note that there are no good wind sites in the Southeast. As
with solar, the cost of produced power is inversely related to the
capacity factor since almost all the costs are building the wind farm.
Thus a site with a capacity factor of 40% would have half the cost per
kilowatt-hour as a site with a 20% capacity factor.
In general wind and solar power are not available when demand is
highest. Wind tends to be strongest at night and lowest in the summer.
Solar power is best in the summer, but the Arizona data show that the
arrays have all but stopped producing electricity by 5 PM in the
summer, just as demand is hitting its peak.
Another problem is that wind and solar generation are variable.
Wind speed changes from moment to moment and clouds block the sun, even
in the desert. This intermittent power challenges the grid to provide
reliable, high quality power when wind and solar are contributing more
than 5-10% of total generation.
One solution to both these problems is to store large amounts of
electricity when these sources are generating so that it can smooth
power output and have that output available when demand is high. Pumped
hydro storage is the best way to store electricity, but few new sites
are available. Compressed air storage looks promising, but is expensive
and less efficient than pumped hydro.
Wind farms can affect climate just downwind, reducing
precipitation. Massive reliance on wind energy would take energy out of
the wind, changing the Earth Climate.
With present technology, the unreliability of generation from wind
and solar means that reliable generation must backup every kilowatt-
hour. A solar array or wind farm may not generate power for days
because of a storm or lack of wind. Since we still want electricity,
fossil fuel or hydro power must be available. A General Electric study
for Texas found that even in windy April, there were hours when the
wind farms were producing almost no power, requiring a rapid switch to
natural gas turbines. Since this occurred during one of the windiest
months, image the difficulties during the summer months when the demand
for electricity peaks and wind resources are small.
The point is that wind and solar can lower the amount of fossil
fuels used for generation, but they don't lessen the need for reliable
generation capacity. For new coal generation with carbon capture and
sequestration, and for new nuclear generators, the capital cost is the
vast majority of new costs and so the savings are small.
I have focused my remarks on wind and solar, but there are other
renewables. Hydroelectric dams generate six times as much power today
as the other renewables, but there is little prospect for getting
significantly more power. Dams are being torn down, not being built.
Geothermal provides power in California and more is planned for the
Southwest. Run of the river hydro could provide small amounts of power.
Biomass could provide significant amounts of power at competitive
costs, but there is a limited amount of land and the biomass is better
used for transportation fuels. Where there are good geothermal
resources, this resource can be attractive. However, the good areas are
limited to the West. Ocean currents and waves can provide power, but
corrosion and withstanding storms make the power expensive, in addition
to other problems.
In good sites, wind power is competitive with new fossil generation
with carbon capture and sequestration. Even at the best sites, solar
photovoltaic generation is several times the cost of wind per kilowatt-
hour. Japan engaged in a massive program of subsidizing solar; Germany
is currently engaged in huge subsidies. While clever in many ways, the
Japanese and Germans don't seem to understand that extracting power
from sunlight, when there is relatively little sunlight, is expensive.
The solar map shows that trying to generate solar power in most of the
USA would be extremely expensive. At good sites, solar thermal power is
almost competitive with new fossil generation.
This catalogue of difficulties should not be regarded as mean-
spirited objections. Rather, my intent is to set out the problems that
need to be solved. We agree that our energy supply must be made
sustainable; we must reduce greenhouse gas emissions, enhance energy
security, and produce energy at a cost that will not derail our
economy.
America's largest fossil fuel resource is coal; we will rely on
coal for much of our energy in the coming decades. In particular, coal
will continue to provide most baseload electricity generation. It is
essential that demonstration coal plants with carbon capture be built
to improve the technology and that DOE shows that massive underground
injection of carbon-dioxide in a range of geological strata can
sequester the carbon without leakage. It is also essential that we
build half a dozen nuclear plants using the new technology to assess
their costs and performance.
While solar photovoltaic power is too expensive for massive
deployment, I urge funding solar photovoltaics research, since this
technology will ultimately provide most of our energy. I also recommend
R&D funding for bulk electricity storage, such as compressed air.
Chairman Bingaman, I commend you for this bill. I particularly
commend you for not trying to identify the technology winners, such as
through a solar mandate. I hope that you can make two changes:
1. Tighten the definition of efficiency and eliminate the
limit on its contribution. This will allow regions that don't
have good wind and solar resources to comply at lower cost.
2. Focus on reducing carbon-dioxide rather than singling out
renewables as the answer. There are significant savings from
letting all technologies compete in satisfying the goals of
lowering greenhouse gas emissions, increasing environmental
quality more generally, increasing energy security, and
improving sustainability, ensuring that energy prices are not
so high that they derail the economy.
Thank you for the opportunity to testify on this important
legislation. I would be happy to answer any questions.
The Chairman. Thank you. Thank you all for your excellent
testimony. Let me start with a few questions.
Dr. Izzo, you've indicated that New Jersey has an
aggressive solar program. Dr. Lave just indicated that he
thinks having a carve-out for solar doesn't make good sense,
given the variations in solar resources around the country. You
have a carve-out for solar in New Jersey. Yours is one of the
States with less solar resources, certainly, than a lot of the
country. What's your reaction to that? Do you think, as a
national matter, we should be trying to have a carve-out like
you've got there in New Jersey, or not?
Mr. Izzo. Our preferred approach would be to have just the
one national standard, and then to use the tax code to help
those nascent industries that need additional help. That would
include both solar and offshore wind.
The Chairman. So, you would not favor any kind of carve-out
for----
Mr. Izzo. I would allow the States to have their own carve-
outs in their programs, but not in the Federal program.
The Chairman. OK. Now, also, as I understood Dr. Lave's
testimony, he was saying that we should not limit the amount of
whatever standard is established, whether it's 15 percent or 20
percent, whatever--the amount that you could achieve through
efficiency should not be limited. Do you agree with that, or
disagree?
Mr. Izzo. I disagree with that position. We need every tool
in our toolkit possible to achieve the 80-percent reduction,
and we have separate programs on energy efficiency, which we're
aggressively pursuing. Similarly, we need to pursue carbon
capture and storage on fossil fuel generation in the R&D space.
We need to pursue new nuclear. Those are all separate issues.
All will be needed on top of renewables.
The Chairman. OK. So, you think having some national
requirement for production of--or--electricity from renewables,
separate from a national requirement for improved energy
efficiency, it makes good sense.
Mr. Izzo. That's correct, Senator. Because, if you think
about it, electricity is 35 percent of the CO2
generated in this Nation. This bill proposes that we have 20
percent of it come from renewables. Twenty percent of 35
percent is 7 percent. We're nowhere near the 80-percent
reduction. We will need to do all the things we've talked
about.
The Chairman. OK.
Commissioner Wright, I was interested in your testimony. It
seems as though you're arguing that, not only are States in the
Southeast, such as South Carolina, unable to achieve the
requirement that we're talking about here with regard to
production from renewables, also it's very, very difficult,
because of the economic circumstances you face, for you to
achieve the energy efficiency reductions--or, improvements that
we're talking about, that it's inappropriate for us to have a
national requirement with regard to improved efficiency, as
well. Is that your position?
Mr. Wright. Yes, sir. You've got a lot of issues, but
obviously we--in the Southeast region, we have low-income
families and households, and they also live in housing that is
inefficient, from an energy perspective, too. If they're not
mobile homes, it's other types of housing.
Because, you know, we've got 10-percent unemployment in
South Carolina right now; it's going to be 14 percent, they
say, this time next year. So, it compounds itself. We believe
that energy efficiency, under the RPS that you've got, that
we're talking about today, the money leaves the State. We
believe, if we do have an RPS, if it--that's where the Congress
would like to go--and we're not opposed to a State-based RPS,
but one that fits our area.
The money--if there were penalties paid, if there were
compliance payments, that money should be reinvested back in
the State, where it can be used to improve efficiency.
The Chairman. I remember a speech I heard Millard Fuller
give, the founder of Habitat for Humanity, where he was saying
that the people that they are building houses for can't afford
large mortgages, and they also can't afford large utility
bills. Therefore, they're building energy-efficient houses,
Habitat for Humanity is. So, there's a little bit of a
disconnect with saying, ``Because the people are low-income in
our State, we can't expect to see improvements in energy
efficiency.''
Mr. Wright. You've also got--and I mentioned it in my
longer version of the testimony, too--you've got a literacy
problem, too, where they--it's just a hard thing for them to
understand what they can do. You know, they're level-1 and
level-2, a significant portion of these people, and it's just
hard for us to--in the Southeast, to have the money leave our
region and not be able to stay there, where it would--we could
use it.
The Chairman. I'm reminded of our former President's
concern about the tyranny of low expectations----
[Laughter.]
The Chairman [continuing]. Taking charge right here, as
well.
Senator Murkowski.
Senator Murkowski. Thank you, Mr. Chairman.
Mr. Lave, in your comments, I think you suggested that the
goal we are all seeking is the same, but then you went on to
state that by focusing on a renewable energy standard, we're
not necessarily getting to that goal of reduction in carbon.
There was an article submitted to the New York Times, at
the end of January, written by the CEO of Entergy, and he
suggested the same thing for his company, if we move to a
renewable energy standard, they will stop doing research
towards carbon sequestration, then how they can actually get to
that clean coal technology? They will switch their focus to
other areas and they won't be working to reduce their
emissions.
Are we in agreement as to what it is that we are attempting
to achieve with the renewable energy standard? Is it the
reduction of emissions, or is it an increase in renewable
energy production?
Mr. Lave. Senator, that's a very good question. I think
that at least my goals are to try and achieve--or, my--to try
and achieve the goals at least cost. But, when you have an RPS,
you reduce carbon dioxide emissions by much less than you would
have thought, because you need to have backup for all of the
solar and wind, and generally that backup is a natural-gas
turbine, and generally that natural-gas turbine is having to
function at much less than full power, and so, being relatively
inefficient. So, for example, if we were to achieve this 20-
percent renewable portfolio standard with wind and solar, you
would have much less than a 20-percent reduction in carbon
dioxide.
So, I think that at least my goals are to try and focus on
these social goals of lowering greenhouse gas emissions,
increasing environmental quality, increasing energy security,
improving sustainability, and lowering costs. I think that not
everybody has exactly those goals.
Senator Murkowski. Let me ask a question about the regional
disparity. You've supplied us with a couple of maps. I think we
know that, across the Nation, wind is not equal, solar is not
equal, biomass is not equal. I think that there is a disparity.
Mr. Furman, you've suggested that it's not discriminatory,
and if in fact, you are going to apply, a one-size-fits-all
standard, you will have areas that perhaps will not be on an
even playing field. How can we best address the regional
disparity?
Mr. Wright, you have suggested that the States need to
develop their own renewable energy plans. There's been a
discussion about whether or not you cap the efficiency aspect
of it. Should we allow additional sources of clean energy to be
counted? What is the best way to deal with the regional
disparity?
I only have a minute left, so I'd like you to very quickly
go down the line.
Mr. Izzo.
Mr. Izzo. The regional disparities are things we live with
all the time. New Jersey has no coal, no natural gas, and no
uranium 238, yet we produce nuclear energy, coal-fired power,
and natural-gas-fired power. We're very grateful that other
market sell that stuff to us.
Senator Murkowski. All, but none of which is counted in
your renewable energy standard.
Mr. Izzo. Correct. But, so, too, a national renewable
portfolio standard will allow us to source renewable energy
from those places where it's most efficient to source it from.
Senator Murkowski. OK.
Mr. Furman.
Mr. Furman. The most important factor, to me, is a
functioning renewable energy certificate trading market so that
Commissioner Wright's consumers, for example, don't have to
build a wind farm in South Carolina. It's not economic. But,
what they can do is, they can buy the certificate from somebody
who develops a wind farm in the Northwest or in the Upper
Midwest, where it is economic, and they'll pay the same price
that somebody in the Midwest would pay.
Senator Murkowski. Commissioner.
Mr. Furman. To me, that is the best way to equalize the
economic----
Senator Murkowski. Commissioner.
Mr. Wright. We buy our coal and we buy our uranium outside,
it's--power's produced for our consumers inside the State. So,
there is a benefit for our consumers in keeping costs low. If
we have to send our money out, that's driving the cost of power
up for our consumers, because we have to send that money as a
compliance payment.
Senator Murkowski. Mr. Jones.
Mr. Jones. In my comments on--addressing the regional
disparities would be a broad, inclusive definition that
recognizes woods' full capability to play a role in a renewable
energy package, where 92 percent of the wood that's currently
being grown in the southeastern United States or across our
country is being excluded from renewables. So, a broad,
inclusive definition that would allow it to reach its full
capability of being used as a renewable source.
Senator Murkowski. Dr. Lave.
Mr. Lave. There is something said here that's wrong. This
notion that if we had tradable certificates, that the price
would be the same in every region is just not correct. I have a
Ph.D. student who's done a thesis looking at getting wind
energy from the Powder River Basin to southern California. The
transmission line itself would more than double the cost of
getting the power there. So, if we had to build these
thousands--tens of thousands of miles of long-distance
transmission to get wind or solar energy to the major places
where it's consumed, then I guess we could bear those costs as
a Nation, but that's usually not the way we do things. I think
the buyer has to pay those costs. So, the cost of power to
places where you had to transmit it a long way would be a lot
higher than the cost of power where it was generated.
Senator Murkowski. Thank you.
The Chairman. Senator Dorgan.
Senator Dorgan. Thank you, Mr. Chairman.
It seems to me that the lack of some sort of central goal
or aspiration for our country has been prevalent for a long,
long while. The proposal of a renewable portfolio standard to
just say, ``Let's decide where America wants to head, here.
Let's decide, for the next decade, where we want to go with
respect to energy.''
I'm listening to this, and it's kind of interesting. The
fact is, Commissioner Wright, you all have about 50 percent of
your power from nuclear, about 40 percent from coal----
Mr. Wright. Sixty----
Senator Dorgan. All right.
Mr. Wright. Sixty-one from coal, according to the PURC
report that came out.
Senator Dorgan. All right, then it can't be 50 from
nuclear----
Mr. Wright. Right.
Senator Dorgan [continuing]. But, the fact is, you import
coal and uranium to produce that power. So, we've built rail
lines and barge lines, and so on, to be able to ship these
things to where you need it. But, we had testimony in this
committee from T. Boone Pickens and many others, about the goal
of trying to build a national transmission grid, a sort of an
interstate highway of transmission, to be able to produce
renewable where you can produce it, and to move it where it's
needed. I think that's necessary. We've certainly built rail
lines and so on to accommodate the ability to move coal. We
ought to do this with respect to transmission lines. If we're
going to move toward an electric-drive-vehicle future, nearly
70 percent of the oil we use in the transportation fleet comes
from outside of our country--if we're going to do all this, it
seems to me you logically have to create some sort of renewable
energy standard. A number of States have moved in that
direction, but I think our country would be well advised to
have a national standard. We've tried it a good many times. I
hope this is the time when we will make that happen.
Having said that, I support coal development. The one point
I would make, Dr. Lave, is, that--the implication of your
suggestion is, that nothing else is happening. We've got $4.6
billion for carbon-capture-and-storage research just in the
economic recovery bill. The Energy and Commerce subcommittee,
which I chair is putting a lot of money into research. I'm
convinced that we're going to be able to use coal in the
future, and de-carbonized coal. So, it's not as if nothing else
is happening.
But, I just wanted to make those points, because I think
the testimony has been really interesting.
Mr. Furman, I think you made the point, as well, about
being able to produce renewables from wherever you can maximize
that production, and moving it on a grid. Was that the point
you were making?
Mr. Furman. It is. Thank you, Senator, because I think
there's two aspects to this regional issue that I think are
being misunderstood. One is, we do need more transmission, in
general, not just for renewables; we've got to do it anywhere.
I testified a few months ago here about that issue.
But, in addition, if you are buying a certificate, if you
are complying, not by buying power out of a wind farm, but
let's assume that I--my company builds a 100-megawatt wind farm
in North Dakota--which we are doing, actually--and we have a
national REC market, renewable-energy-certificate market; we
can sell those certificates into the market, and we can also
sell the power into the grid. Now, somebody from South Carolina
can buy that certificate, somebody from North Dakota can buy
that certificate. It's the same price, and you turn it in for
your compliance. It doesn't require, as Dr. Lave suggested,
that we transmit the power to South Carolina; it simply
requires that we sell the energy into the grid and then sell
that certificate on the open market. It is a much more fair,
egalitarian way of addressing the economics. There are regional
disparities.
Senator Dorgan. Yes. There's an old saying, ``If you don't
care where you're going, you're never going to be lost.'' The
point is, we need to have a direction, here, as a country.
I think one of the questions that has been raised by some
of you is about the market system. I can't think of a more
effective system in the world to allocate goods and services
than the free market, frankly. But, there are times when it's
very important to decide, ``Here's where we want to go,'' set a
direction, and then try to allow that market system to work
inside that set of goals. I do not think a Renewable Portfolio
Standard is in conflict at all with a market system. But, I
think if we just decide, ``You know what, we'll just let
whatever happens happen,'' I don't think we'll ever get to 10,
15 or 20 percent renewable energy, because there are a lot of
other ways for others to subvert that. I think it's in our
country's interest to decide to produce more of our electricity
from renewable sources.
So, you all have, I think, given us a lot to think about,
and to my colleague Senator Murkowski, I think, too, there are
probably things that can be contributed to this discussion and
the creation of some sort of Renewable Portfolio Standard that
can come from all areas of philosophy here on this committee. I
look forward to the discussion that we can have to try to
determine how we do a lot of things well--produce coal, in a
manner that is protective of our environment, substantially
increase renewable energy, and make us less dependent on
foreign oil, which I think is a huge vulnerability for the
future of this country. The question is, how do we do all of
these things well.
The Chairman. Senator Corker.
Senator Corker. I didn't realize it was my turn, down here.
Thank you, Mr. Chairman.
I have to tell you that I think there are so many things
right now that could unite our country around energy. I think
there is a tremendous desire that this country be energy-
secure. I think there's a tremendous desire that we do so in an
environmentally sound way. It troubles me that the first thing
we do, right out of the chutes, is discuss a policy that
divides our country. It's an amazing thing to me.
I think there's a possibility that, as a country, we could
come together around something that's transparent, relating to
cap-and-trade or a carbon tax, that would do the exact market
things that Senator Dorgan was talking about. Yet, today we
seek a policy that divides our country, that discriminates.
Now, if this is the first priority of this Administration--and
I know that was said in earlier comments--I don't know if
that's true or not, but if it is, it's an amazing thing to me
that we would start out with such a crass policy that separates
this country.
Mr. Furman, to say that it's not a transference of wealth
for Mr. Wright to have to purchase certificates, which cost
money, to meet an obligation so that it can be met in another
part of a country--of our country, it's just not true. I mean,
that's just absolutely not true. I don't think you would agree
with this, but would it not be the same to say that, if you're
going to benefit from any kind of national subsidies, like this
would create, that we would make you build wind farms in every
part of the country with your own money? That would be a
national standard, and maybe that's one I could get behind, if
you were doing it with your own money. But, explain to me how,
in fact, if he has to buy certificates to meet a standard, and
send money to you, that is not a transference of wealth.
Mr. Furman. I think we will probably----
Senator Corker. Please be very brief.
Mr. Furman. Yes, I----
Senator Corker. He would have to buy--pay money to buy
those certificates, is that correct? They would go to another
part of the country. Just ``yes, yes,'' or ``no, no.''
Mr. Furman. Every----
Senator Corker. I mean----
Mr. Furman. Yes, everyone will buy a certificate in the
country.
Senator Corker. OK.
Mr. Furman. Everybody will pay for it, and we'll be
essentially the same price. There may be small regional
differences. But, everybody will do that.
Senator Corker. OK.
Mr. Furman. So, it would be----
Senator Corker. So, it is a transference of wealth.
Mr. Furman. It's a transfer--well, in the sense that--sure,
you will pay me to money to----
Senator Corker. OK.
Mr. Furman [continuing]. Build my wind farm, and make an
investment in----
Senator Corker. What about if we made you build wind farms
in Tennessee if you're receiving--you don't want to build 'them
there, because there's no wind; you don't want to build solar,
because there's no solar. But, what if we made you do that?
Would you like that transference of wealth?
Mr. Furman. If--I don't--first of all, I'm not sure that's
a transference of wealth, because we would only do it if we got
a reasonable investment return.
Senator Corker. Which----
Mr. Furman. Second, I think it would be inefficient--it
would be a higher-cost solution to what we're talking about.
The best wind resources are in the Northwest--or in the Upper
Midwest, and that's where you should----
Senator Corker. Let me--in the desert areas of our country,
if we said they had to use hydro power there, how would you--
how do you--is that a good idea?
Mr. Furman. That--it's a bad idea.
Senator Corker. What about, in the desert, if we said you
had to use biomass. Is that a good idea?
Mr. Furman. Of course not.
Senator Corker. OK, then I just--I guess what I would say,
Mr. Chairman, we have an opportunity, in a few months, I think,
to debate something, like cap-and-trade, or to potentially have
a carbon tax, both of which we could return 100 percent of the
money back to taxpayers, and it would be very transparent, and
it would create a market system. I have no idea why we would
take this transference-of-wealth component out that--we have
many environmentalists in our State. I happen to be one of
them. OK? I happen to support some of these other initiatives.
I cannot imagine why this administration would chose, on the
front end, to divide our country--to divide our country instead
of focusing on uniting our country around something that would
create exactly the market-based system that Senator Dorgan is
talking about, and not pit one part of our country against
another.
Dr. Izzo, let me ask you this, would you be willing to
build windmills and solar systems in Tennessee, with your own
money, if we had sort of a national standard that said you had
to do this in every part of our country?
Mr. Izzo. Yes, we would. We would charge you the cost of
doing that, and your customers----
Senator Corker. You wouldn't be able to sell it, of course,
at that cost, but you'd be willing to do that----
Mr. Izzo. That's my point.
Senator Corker [continuing]. With your own money?
Mr. Izzo. That's my point, is that we would do it wherever
people wanted to, but there are places that it's lower cost to
do it.
Senator Corker. OK.
Mr. Izzo. So, you would have a choice, in Tennessee, of
paying us 40 cents a kilowatt hour or paying 20 cents a
kilowatt hour to somebody in Arizona.
Senator Corker. Yes.
Mr. Izzo. The choice would be up to Tennessee.
Senator Corker. That's a transference of wealth, isn't it?
Mr. Izzo. It's the same as when we buy coal from the
Midwest or when we buy natural gas from the Gulf or when we buy
corn from the Midwest.
Senator Corker. No, because you're producing it in your own
State, which is a whole----
Mr. Izzo. Not producing the coal or the natural gas.
Senator Corker. You're producing the power from that in
your own State. OK.
Mr. Chairman, I would hope that, with all the troubles that
our country has right now, that, instead of creating this
divisive picking of winners and losers, we would, instead,
focus on something that will unite our country. I would just
love if you would respond: Would a cap-and-trade system not
actually affect carbon and global warming, that you care about
so deeply, much better than having a renewable portfolio
standard?
Mr. Izzo. A cap-and-trade system would be the underpinning
of making intelligent market decisions. Senator, I never once,
for a second, thought that a cap-and- trade system, given the
regional variations in carbon intensivity would be any less
divisive than the conversation we're having now.
The Chairman. I hope we get a chance to test that
proposition later----
[Laughter.]
The Chairman [continuing]. Later this year, and have an
opportunity to do something on cap-and-trade in the Congress,
as well.
Let's see, Senator Stabenow is next.
Senator Stabenow. Thank you.
First of all, Mr. Chairman, we are honored to be a member
of this committee, as a new member who has tremendous interest,
coming from my home State of Michigan, in energy. I want to
thank you for your ongoing leadership on so many issues, and to
our distinguished ranking member, as well. So, I'm looking
forward to working with the committee.
I'm also looking forward to the provisions in the recovery
package that really start us down the road as it relates to
renewable energy incentives, and particularly around
manufacturing, as well.
I just want to indicate, for the record, that there are
8,000 different parts in a wind turbine, and we can make every
single one of those in Michigan, just for the record.
We also create about 30 percent of the polysilicon that's
used as a basic material for solar panels, in Saginaw Township,
Michigan, through Dow-Corning. I'd like very much to stop
shipping that out of the country to make solar panels. I'd like
very much to see it made in Michigan and around the country.
So, that's my plug for Michigan. It's a plug, actually, for
jobs, which I believe is very much about what this is about as
we look at it.
I wanted to ask a question related particularly to
forestry. We have 19 million acres, in Michigan, of beautiful
forests, and one of the issues that I've been focused on is the
fact that, while the tons of carbon per acre in a forest can
vary greatly, we know that EPA says that many of our forests
have about 100 tons per acre, we may be looking at 100 million
tons of carbon in Michigan alone, so that my concern is, if we
are not focusing on how we maintain those forests, we are
actually making global warming worse by releasing tons of
carbon into the atmosphere. So, I'm anxious to see us have
forestry policies a part of whatever we do.
Mr. Jones, I wonder if you might just speak a little bit
more as to the definition--if we were going to craft a
definition that best used wood and forest biomass and gave your
private landowners a market so they were not selling their land
for a shopping mall or a residential community or whatever--if
we kept those forests--first, we're keeping carbon capture--
we're stopping carbon from going into the air, but we're also
then giving you a market. So, I wonder if you might just speak
a little bit more about that.
Mr. Jones. I think the two things can work together. With
the decrease of markets, without a new market for forest
products that--a good definition--a broad, inclusive definition
that would say ``trees,'' include all wood products that are
being grown on private lands and these other lands. Without
that, I think we run the risk of--higher risk of conversion to
other uses, other than forestland.
When we convert the forestland to another use--a shopping
mall, a residential community--we've lost it. Now we have no
potential for sequestering carbon or capturing that carbon out
of the air.
So, what I'm looking at is saying that, with increased
markets, we'll encourage, not only the retention of forestland,
but hopefully the growth of new forestlands, taking marginal
agricultural lands and putting them into healthy, productive
forests that, not only helping us meet renewable energy goals,
but are also out there sequestering carbon and meeting other
goals that society would benefit from--clean water, clean air,
wildlife habitat, and all these other things.
So, if I look at a definition that would be in a renewable
electricity standard, or an RPS, that would be encouraging, not
only to the retention and growth of new forests for the
CO2 carbon benefits and also for those other
benefits, I would say one that's very broad and says ``trees.''
Currently, we have some very stringent laws and
regulations, at the Federal and the regional and the State
level, that monitor the health and sustainability of our
forests. The Clean Water Act is a key piece of legislation that
helps to make sure that we do our forest management practices
correctly. Almost every State in the country has best
management practices. Some in the Pacific Northwest are
mandatory, in the Southeast--they're done on a voluntary basis,
but they are all monitored. Every State in the country has a
State forester, and they're monitoring and reporting on the
health of our forests.
I'd say, without an inclusion of wood or forests into a
renewable energy standard with that broad definition, we do run
the risk of having higher conversion rates of forests into
other uses, and then we lose all those other benefits.
Senator Stabenow. OK, thank you.
Thank you, Mr. Chairman.
The Chairman. Thank you very much.
Senator Bennett.
Senator Bennett. Thank you very much, Mr. Chairman.
Thank you, to the panel. It's been a very interesting
discussion. But, it has struck me that the discussion has taken
place in a stovepipe.
Let's look at our overall energy situation and energy
needs. The one thing that is clear to me, as I try to look at
that in the future, is that we have--I think, Dr. Izzo, you
have hinted at it--enormous demand for huge scale of
electricity, much more than we have now.
Let's, for just a moment, look at the overall energy needs.
I've driven a hybrid car for 8 years. I didn't buy it for
environmental purposes, I bought it because I wanted to become
familiar with the technology, to see how it would work. Senator
McConnell used to call my first one ``the car you put on like a
pair of pants''; it was a Honda Insight. As tall as I am,
people had a hard time understanding how I got in it. Actually,
it was really quite roomy once you got down that low and in
that car.
[Laughter.]
Senator Bennett. I now drive a Ford Escape hybrid. I
increased my mileage substantially. If it were a plug-in
hybrid--and I have driven one of those--we could have mileage
of over 100 miles to the gallon. All right. Plug it in at
night.
If we had, say, 30 million--that's 2 years' production of
new cars--plug-in hybrids on the road, that would be 30 million
batteries that could be charged with electricity at night, when
the utilities are basically giving electricity away, and by--we
wouldn't need to create any batteries. We would have a massive
forest, if you will, of batteries that could soak up all of
that electricity. That would require increased electricity.
So, when you look at the scale--and then, the economy
continues to grow; you're going to want more electricity. So,
if you can transfer the energy required for transportation into
electricity, and meet the demand for electricity, you're
talking a tremendous demand.
You're not going to meet that demand with wind and solar.
I'm sorry. No matter how many windmills you build, no matter
how many solar panels you put out, you're only going to be in
single digits in the percentage of power you can provide in
that kind of scale.
So, the thing that strikes me about this conversation is
that, with the exception of Dr. Izzo and Commissioner Wright,
no one has used the word for the greatest source of noncarbon
renewable power that we have in this country, and that's
nuclear.
Charles de Gaulle looked at France and said, ``You know, we
don't have very much natural gas, we don't have very much coal.
We're going to have import all our power. We're going to become
nuclear.'' Eighty percent of the electric power in France comes
from nuclear power, and they sell it over the border into
Germany, where the greens have called a ban on nuclear power.
You know, they take the nuclear power, they just don't want to
have any of it in their own backyard. The French have never had
any problems with storage, they've never had any problems with
the fuel rods or any of the rest of it.
I'd like you to forget wind and forget solar and forget
biomass for just a minute in this conversation, and talk about
the scale that could be achieved in noncarbon-emitting
renewable that we could get from nuclear. I'd like your
opinions and reactions to that.
Mr. Lave. Want me to start?
Senator Bennett. Yes, Dr. Lave.
Mr. Lave. It was only the ``5 minutes'' that kept me from
praising nuclear, here. But, again, trying to be smart about
this, the current nuclear plants we have in the country are
running with operating factors of more than 90 percent. They're
doing very well.
We are on pace to build between four and seven new nuclear
plants by 2020. We're going to have to see how expensive they
turn out to be. Right? There's nothing wrong with the
technology. We just have to see how expensive they are.
Senator Bennett. Would you support building a reprocessing,
like they have in France, so that the present spent fuel rods
are also turned into a major source of power?
Mr. Lave. I'm looking at Chairman Bingaman on this. This
National Academy of Sciences study is looking exactly at that,
and I don't want to comment on that. But in----
Mr. Izzo [continuing]. About 4 or 6 weeks, you will have, I
think, a definitive report on how much sense that makes.
But, here the one thing I'm trying to emphasize is that we
would like to satisfy having low-carbon electricity, and so on,
at the lowest cost; that is, we'd like to get these goals so
we're not wasting any money in doing it. Nuclear certainly has
a role in that. How much these plants are going to wind up
costing is then going to determine how much of a role nuclear
will have in the future.
Thank you.
Senator Bennett. Thank you.
Anyone else? Yes.
Mr. Wright. Thank you very much for the question. We
actually have three open dockets--or, two open dockets for
three plants, nuclear--new reactors in South Carolina, as we
speak, one, which will be voted on tomorrow, for two reactors,
possibly. I believe, as you do, that, really, personally, we--
maybe we should be looking at a clean energy policy that uses
everything that we've got on the table in the United States,
regardless of region, to try to meet energy independence,
reduce our carbon footprint, look at greenhouse gas. I mean,
we're going to need it all.
You are correct, that the--about the hybrids and the plug-
ins and all that. I mean, those--nuclear would be the way that
answers that. I believe that it has a place and it will be
developed.
Mr. Furman. Senator, I mean, I--just to--since you've asked
the question, I don't--I don't--this is a personal opinion, but
I think it was--it would probably also be reflective of my
company. Nuclear, and, for that matter, clean coal, are
legitimate tools in the toolbox, as Dr. Izzo pointed out. We're
going to need all the tools, going forward.
I think the only issue is timing. You know, you've had a
number of nuclear projects that have been announced and then
withdrawn, and partly that's because, as Dr. Lave pointed out,
we don't know a lot about the costs of building a nuclear
plant, because we haven't built one in so many years. I think
what has happened is, you've seen a number of companies start
to build them and then realize that the costs have gone up far
more than they realized. It's a big bet, it's putting a lot of
investment in a single source.
Having said all of that--and similar for clean coal. Clean
coal, I think, is definitely in our future. We have tremendous
coal reserves; we just need to use them in a more
environmentally responsible way. But, I don't think either
technology is quite ready for prime time. That's a personal
opinion. But, I don't think we should ever take away, from Dr.
Izzo and the other utilities, the tools that we're going to
need to reduce our carbon and reduce our reliance on foreign
sources, as well.
Mr. Izzo. I think the points have already been made. It
clearly has to be part of the toolkit, and we don't know what
the capital costs are. We know that nuclear plants run 90
percent of the time, solar panels in New Jersey run 10 percent
of the time; a factor-of--10 difference. There's no way I can
build a new nuclear plant in 4 years. We're putting solar
panels up today. We'll have offshore wind running in 2 years.
The science keeps telling us that timing matters. The more
carbon we put in the atmosphere, the more inertia we build into
the system, the tougher it'll be to undo it.
Senator Bennett. But, you're still operating in single
digits with wind and solar, you're not addressing the scale
problem.
Thank you, Mr. Chairman.
The Chairman. Thank you.
Senator Bayh.
Senator Bayh. Thank you, Mr. Chairman.
My first year at law school, the dean, on our first day,
advised us to embrace ``exuberant skepticism.'' So, I'm going
to try and follow in that tradition today. But, don't read too
much into the questions I'm about to ask; I'm just trying to
get to the practical bottom line here.
Dr. Lave, do I have the pronunciation of your name correct?
Let me start with something--and it gets to what Senator
Bennett was asking, there at the end. If I understood your
testimony correctly--I think one of the other panelists
indicated that about 37 percent of our CO2 emissions
come from the generation of electricity. So, even if we
embrace--and I think this is the point you were making--a 20-
percent RPS standard, that gets us to about a 7-percent
reduction in CO2 emissions. Is that an accurate
representation of your testimony?
Mr. Lave. Actually, less than that, because you'd----
Senator Bayh. I was going to follow up and ask and--then
you----
Mr. Lave. Yes. Sure.
Senator Bayh [continuing]. Referred to backup capacity. So,
my question to you is, on CO2 emissions, If we adopt
a 20-percent standard, what is your estimate in terms of what
we would actually achieve, in terms of net CO2
reduction?
Mr. Lave. I think that if the 20 percent came from wind and
solar, that the reduction in CO2 emissions would--
might be on the order of about--instead of 20 percent, about 12
percent of the electricity total. Right? So, that is--you're
getting a little bit more than half of what it is you might
assume.
Senator Bayh. My math is not very good. You said--12
percent of 37 percent gets to what, about 5 percent?
Mr. Lave. Something on that, sir. Yes, sir.
Senator Bayh. OK. But then, it's not all going to be wind
and solar, correct? You are going to have some biomass, you are
going to have some other things. If you assume that, given the
geographic complexity, and given the diversity of the country,
you're looking at something south of 5 percent?
Mr. Lave. I think that when--when you're looking at biomass
or geothermal, then--or this new hydro--that's really a kind of
a one-for-one----
Senator Bayh. OK.
Mr. Lave [continuing]. That is, that's reliable. You don't
need backup on those, so you really get a one-for-one reduction
in CO2 emissions.
Senator Bayh. OK. So, we're looking at about 5-percent,
then?
Mr. Lave. Perhaps, yes.
Senator Bayh. If you net it all out.
Mr. Lave. Yes.
Senator Bayh. OK. Do any of you--there's really not much of
an argument to be made that a Renewable Portfolio Standard
decreases the need to import foreign oil. Is that correct?
Mr. Lave. Sir, only 2 percent of electricity is generated
by oil.
Senator Bayh. Right.
Mr. Lave. That's generally PEDCO. So, I don't think we're
talking about that. The point was made earlier about natural
gas imports. If we started importing a lot of natural gas, that
would be an energy security issue. I think that's likely to
happen in about 5 or 6 years. But, there's dispute on that.
Senator Bayh. So, if we wanted to really seriously tackle
CO2, we've got to look at things with more scale and
scope. I think that's the point that Senator Bennett was
making, and it seems to me that that's the point you are
making.
Mr. Lave. Yes, sir.
Senator Bayh. Let me play the devil's advocate, here, as a
former Governor, but someone who now has a national perspective
and understands that sometimes that has to take precedence. Our
State has considered an RPS standard in our State legislature,
and has chosen not to adopt it. For those of you who support
this proposal, why do you think you know more about what is in
the best interests of the people of Indiana than our State
legislature or our Governor?
Mr. Izzo. The primary purpose of the standard is really to
forge a nexus between three critical issues that are affecting,
not only the nation, but the planet. The first issue is global
climate change. It's not ``New Jersey climate change.'' The
second issue is energy security. It's national energy security,
it's not ``New Jersey energy security.'' I'm picking on my own
State.
Senator Bayh. Right, but----
Mr. Izzo [continuing]. Third issue is creating jobs.
Senator Bayh. How does this relate to energy security?
Mr. Izzo. If you electrify transportation, as I think the
Nation should seek to do, you're going to just shift the carbon
production from transportation to electricity.
Senator Bayh. Correct, but there are other ways to generate
electricity than just a Renewable Portfolio Standard.
Mr. Izzo. Not carbon-free. Nuclear and renewables are the
only way to do that right now. We don't have carbon capture and
storage. If I put a shovel in the--if I decide, today, to
invest the money needed to build a nuclear plant, it won't go
COD for 12 years.
Senator Bayh. Do any of you have an estimate--our State is
about--I think we get less than 1 percent of our energy from
renewables, currently; we're about 95 percent dependent on coal
generation for our electricity. Any of you care to estimate
what this would do to the cost of electricity for the
ratepayers in Indiana? Maybe, Mr. Wright, since that's your
business, do you have any idea about that? Or any of the
others, on the other side of the debate? I'd love to hear from
you, too.
Mr. Wright. That is a real concern for my State, but I can
tell you----
Senator Bayh. This is essentially a tax increase.
Mr. Wright. It is. It's been estimated that it's about--
around $270-million impact to South Carolina. I have some
numbers from Arkansas, from their co-ops and from, I believe,
Entergy, who does theirs, and they were talking as much as--by
2015, $1.7 billion, at a rate of about $340 million a year----
Senator Bayh. My time----
Mr. Wright [continuing]. For----
Senator Bayh [continuing]. Is expired, but I think your
point was that if you're going to have to pay for some of these
things, you'd at least like to have it returned to the State to
focus on energy efficiency----
Mr. Wright. Right.
Senator Bayh [continuing]. To deal with the problem you've
got.
Mr. Wright. The ratepayer has to pay it. That's my concern,
as a regulator. I've got to watch out for the ratepayer.
Senator Bayh. Mr. Chairman, my time is expired, but anybody
on the other side of this debate want to address the issue of
rate increases and that kind of thing?
Mr. Furman. Senator, I thank you for the opportunity to
address this--I think one thing that has--that is often not
taken into account in some of the studies that were just
cited--they're simply looking at the cost of renewables,
they're not looking at the impact that renewables will have on
the gas market--renewable energy, whenever we--and I used to
operate a utility system, and, you know, during the energy
crisis in California, you know, we were facing extraordinarily
high prices. Bringing on wind, we could do it in 18 months, we
could do it very quickly, and it very--and it absolutely
displaces natural- gas generation. A lot of the market for
electricity generation--not everywhere, but a lot of the places
in the United States--is based on the price of natural gas. So,
when you drive down what--there's an economic benefit to
displacing that generation.
I think the other thing that I would say is, energy is
national. I mean, when we operate the utility grid, you know,
we have to pay attention to people like Commissioner Wright,
because they drive our economics. But, the fact of the matter
is, electrons go where they want, and the rest of the energy
network, you know, is a free market. I mean, coal moves freely
around the country, as does natural gas and other commodities.
So, this is a national issue. This is an issue of national
imperative, because 5 or 6 years will be here before we know
it, and we need to get prepared, not unlike what France did
with nuclear power, not unlike what Brazil has done with
ethanol; they've adopted national policies, because they've
made sense for the times. I think that's where we are.
Senator Bayh. Thank you, Mr. Chairman.
The Chairman. Senator Barrasso.
Senator Barrasso. Thank you very much, Mr. Chairman.
I believe Senator Bayh is absolutely right, because nearly
96 percent of our electricity comes from coal in Wyoming.
Wyoming consumers have some of the lowest retail prices per
kilowatt hour in the United States. We're at 5.2 cents a
kilowatt hour for electricity in Wyoming, and it's not a
coincidence that those low costs are related to coal. Coal is
still the most affordable, available, reliable, and secure
source of energy in the United States. I think that mandating a
national renewable portfolio standard like this will have, you
know, an immediate impact, and direct impact, on the people in
Worland, Wyoming, and all across the communities, higher
electricity costs. It doesn't seem like we heard anyone say,
here, that it will not have a higher electricity cost.
But, I want to get back to something Senator Bayh talked
about, which was the practical bottom line. The Wall Street
Journal had an article yesterday, ``New Grid for Renewable
Energy Could be Costly.'' I don't know if you saw that, on page
A4. It talked about the 15,000 new miles of transmission line
that'll be needed, about 100 million--$100 billion in cost.
But, one of the things that they talked about is, the power
lines will have to be built somewhere, in someone's backyard;
and they thought 15,000 new miles of transmission would result
in about 15,000 lawsuits. The question is, How do we, you know,
address this whole issue when we take a look at legislative
proposals on a renewable portfolio standard? Is it appropriate,
at the exact same time, to address the regulatory, the legal
issues, that create the bureaucratic hurdles, whether it's
NEPA, whether it's the Endangered Species reform? Those are
things that come to mind. I'd like to go down the panel to see,
How do we address that as we look to try to put this national
energy grid together?
Mr. Izzo.
Mr. Izzo. Perhaps incorrectly so, I compartmentalize this
discussion into two components. Component No. 1 is, Do we need
renewable sources of energy? The answer to that is,
emphatically, yes. Then the question becomes, Where do we
develop them? That answer is much more complicated. That is a
tradeoff between where are the resources and where are the
users. Transmission is a cost that has to be applied to that.
So, the factors of production may favor the Southwest for
solar, but shipping that to the Northeast will add cost to it.
One, therefore, has to debate, well, even though there's less
sun, perhaps, someplace else that's closer, the delivery charge
is less. So, the whole notion of delivery charges will
influence where, but not how much.
Senator Barrasso. So, you're talking about financial cost,
but there's also a time cost involved in trying to go through
all of these processes, which, even if the money is there to
start with, day one, you're still taking a look--and Boone
Pickens, when he came here, he said his biggest challenge was
not the money, it was the time delay in trying to get some of
these things going.
Mr. Izzo. Absolutely correct, Senator.
Senator Barrasso. Mr. Furman.
Mr. Furman. If I could add a couple of things. One, the
cost of transmission, in the grand scheme of things, is about
10 to 15 percent of the cost of delivered electricity. So,
while we can talk about big numbers for transmission, that only
looks at what it costs--there are--whenever you build a
transmission line, there's a corresponding benefit. You have
lower costs of dispatch, you have other benefits. So,
transmission, in my view, is a good deal.
Second, we have massively under built and maintained our
transmission system in this country for the past 10 to 15
years, maybe 20--maybe approaching 20 years. We have to build a
lot of transmission. Even if you completely reject a renewable
portfolio standard, we have to make substantial investments.
The third point I would make is the impediments to building
transmission are several. You mentioned siting and
environmentally--just the whole siting issue. That is a big--
``not in my backyard'' is a big issue. But, second is joint
planning, the ability to look across States and to plan. Then,
the third and most important is cost recovery. We're asking
commissioners, like Commissioner Wright, to make decisions
every day about building the national grid. It is an interstate
highway system, and it's as if you were asking a commissioner
in Pennsylvania to authorize the construction of an interstate
highway going from, you know, New York to Detroit; it----
Senator Barrasso. Thank you.
Mr. Furman [continuing]. Doesn't work.
Senator Barrasso. Commissioner Wright.
Mr. Wright. You raised some very good issues. You know, I--
one of the things that I've thought about, just--when they
talked about, ``Well, South Carolina has possible wind off the
coast.'' I mean, are we going to go off any lands, like Federal
lands or anything like that? That would be a real issue. How
does--how is that going to be addressed? I agree, I think your
15,000 lawsuits are low. I think there would be more than that.
But, you know, again, I'm back to the State. I'm
responsible for making sure that we have reliable, affordable
power and that our utilities are able to do that at a profit
that's regulated. So, I think--nationally, I think you do need
to look at transmission; I think it's going to have to be
something you've got to do.
Senator Barrasso. Mr. Jones.
Mr. Jones. Once again, I think if we allow all available
renewables to participate, we can help take advantage of some
of the existing resources and facilities, and hopefully
somewhat offset the impact of new transmission.
Senator Barrasso. OK.
Mr. Lave. The analogy with the interstate highway is not a
correct analogy. The interstate highway meant that I could get
on the freeway in one part of Pittsburgh and get off it at
another part of Pittsburgh. When we build a transmission line,
it's from here to there. Right? It is directed at a particular
place. It's not something that somebody else can get on and go.
So, it's a piece of national infrastructure, but it's not like
the interstate highway.
Again, we had a Ph.D. thesis that was done, trying to take
a look at whether--the difficulty with siting transmission. The
answer is, there are--it is really difficult to site
transmission. Under the legislation passed 2 and 4 years ago,
Pennsylvania--most of Pennsylvania was designated as a national
transmission corridor. You want to count the amount of
transmission built in Pennsylvania, or approved? Right? That is
that we've got a congressional delegation that's going to tell
you, ``You're not going to build any damn transmission in
Pennsylvania, thank you very much.'' I think that's going to be
true.
Then, just one other part of this, and that is, it is true
that if we had a national market in these renewable standards,
that the price would be pretty much equal across the Nation,
but the price of electricity would not. In your home State,
electricity would be really cheap. In southern California, it
would be really expensive. I don't want to get into too much
jargon, but there are things called ``locational marginal
prices'' that depend on transmission costs, that depend on
congestion. Those LMPs are really different between different
areas.
So, I think the result of this would be that, yes, South
Carolina would have to pay 3 cents a kilowatt hour for that,
but it would be on top of a much higher price of electricity
than you were paying in Wyoming.
Senator Barrasso. Thank you.
Mr. Chairman, Dr. Lave had a wonderful article on the
issues in Science and Technology, fall 2008, called ``A
National Renewable Portfolio Standard: Not Practical.''* I
would commend it to the committee and ask that a copy of it be
made a part of the record.
---------------------------------------------------------------------------
* Article has been retained in committee files.
---------------------------------------------------------------------------
The Chairman. We will include it in the record.
Senator Barrasso. Thank you, Mr. Chairman.
The Chairman. I think Senator Menendez was here at the
beginning of the hearing, and he's come back, so perhaps we
should let him ask questions.
Senator Menendez. Thank you, Mr. Chairman.
Dr. Izzo, I know that the RPS that New Jersey has created
has created hundreds of new jobs. But, if we institute a strong
national renewable electricity standard, doesn't it have the
potential to create thousands, or even tens of thousands, of
new jobs in manufacturing, in installing wind turbines, solar
panels, jobs boring holes for geothermal projects, jobs
harvesting biomass, engineering, designing, all of these
projects? So, when we balance, in terms of the costs, isn't
this really a very strong job creator?
Mr. Izzo. There's no doubt, Senator. You've hit upon all of
the categories, as well. Obviously, we're most affected by the
installation jobs, but there are manufacturing jobs. I know
there have been some large announcements made by Vestas, in
Colorado. The Senator mentioned some jobs that were coming to
Michigan for blade manufacturing, and then the ensuing
multiplier effects. But, you said it well.
Senator Menendez. Let me ask you, 28 States currently have
an RPS policy in place, and many are much more aggressive than
any of those being proposed federally. Do you agree that, if we
were to pass any Federal standards, that States should retain
the ability to have their own stronger targets?
Mr. Izzo. Yes, without question. To that point, Senator
Menendez, I will say that, in 2007, 76 percent of the renewable
energy generation that was built in this country were in RPS
States. So, RPS matters in encouraging renewable generation.
Senator Menendez. Finally, Mr. Chairman, I wanted to get
Dr. Izzo to agree with me twice so I could disagree with him
once.
[Laughter.]
Senator Menendez. That is, I'd like to ask unanimous
consent to introduce into the record a study from the Lawrence
Berkeley National Laboratory. It's entitled ``The Treatment of
Solar Electricity in Renewable Portfolio Standards.''* The
study shows that States that had a specific carve-out for solar
energy successfully created the construction of solar projects,
while those without a carve-out did not lead to solar
deployment. It seems to me, if we do not have a carve-out in
this bill for other technologies, or a reverse carve-out
limiting how much of a requirement can come from onshore wind,
we will find ourselves, in 2020, with only one mature renewable
technology. It seems to me that we need a system that helps
various--several mature technologies to be achieved in order to
reach our collective goal.
---------------------------------------------------------------------------
* Document has been retained in committee files.
---------------------------------------------------------------------------
So, I'd ask unanimous consent to include that in the
record. I think it's an important part, certainly, of the
debate, as we move forward in figuring out how we have multiple
renewable energy sources that can mature to both productivity
and commercial deployment in a way that meets these goals.
The Chairman. We will include that in the record.
Senator Menendez. Thank you, Mr. Chairman.
The Chairman. Senator Burr.
Senator Burr. Thank you, Mr. Chairman.
As you can see, there's tremendous interest in this subject
and the need for extended hearings, I think, especially to have
the administration here to tell us how they would implement a
Federal RPS. So, I know, and I hope, that the chairman will
have additional meetings.
I'm sorry Senator Bayh left, because I did have the Duke
Energy projections of what the RPS would cost for Indiana. I'm
not sure if Duke's the sole supplier of power there. It's $715
million over 10 years. Of course, under this proposal, the
costs would extend to 2039. For North Carolina, the 50 percent
that Duke covers would be $1.5 billion. For South Carolina,
Commissioner Wright, $591 million just for the Duke portion. I
might add that those numbers, for North Carolina, do not
include the cost--does not take into account the ``renewable
mandate in North Carolina'' cost. So, it's far going to exceed
that, before we've actually paid for the power.
Let me turn to you, Commissioner Wright, if I could. We've
already discussed that North Carolina is the only southeastern
State with a renewable portfolio standard, 12 and a half
percent. How would this Federal program, in your estimation,
affect North Carolina and its ratepayers?
Mr. Wright. Those things that are qualified under North
Carolina's RPS may not be the same as what is in the standard
that we're talking about here today. I haven't looked at the
detail, specifically, of the RPS in North Carolina to know
what's covered and what's not. In North Carolina, the 12-and-a-
half percent--I believe 40 percent of that 12-and-a-half can
come from energy efficiency, which, I think, you do the math,
it's--that's 5 percent. So, that's the same as what's in the
RPS we're talking, today. But, you know, every State is going
to be different. Those that have RPSs, they're not the same as
what we're talking about in this particular proposal today. So,
it will affect States. It's going to be costly to them----
Senator Burr. Yes.
Mr. Wright [continuing]. Especially in my region.
Senator Burr. Mr. Furman, if I understood what you provide
in the wind generation, you're proposing that you should get a
renewable--there should be a renewable electricity credit
that's traded. If South Carolina needed additional renewables
to meet their portfolio standard, they would pay you for that
credit. In addition to that, the power you generated, you are
selling, so you're getting money because you're providing him a
credit, and you're producing power that you're selling. Do I
understand it correctly?
Mr. Furman. That's true.
Senator Burr. I encourage you to get with General Motors,
because they cannot figure out how to make money.
[Laughter.]
Senator Burr. If they could figure out how to provide a
picture to people that would like to buy a Suburban, but,
because of fuel efficiency standards, are buying a hybrid,
then--and they could make money by selling the picture and
money by selling the hybrid, I'm sure that they could figure
out how to make money and compete against the Japanese. But,
I'm not sure that--unless we give you the honeypot of people
paying something for nothing, except to meet this arbitrary
number that we've set--not one that's set by our State, one
that we have applied a one-size-fits-all across the country and
said, ``Doesn't matter whether, geographically, you can take
advantage of anything, we'll give you the ability to buy this
credit so everybody hits it, but we're not going to pay any
attention to how much that costs you or how much money you
export.'' It's a great business model. I commend you for it.
I'm just not sure that I want to be a participant in something
that accomplishes a good feeling, but not an effective cost for
the ratepayers in the States that don't have the benefit.
Now, we've looked at the trading that goes on with carbon
trading in Europe. I'm sure it has its supporters and its
detractors. I want to look at how they've cleaned up their
emissions. It hasn't cleaned up very much. There's a lot of
money trading hands. At some point, we've got to get focused on
the outcome, and that's, Are we improving the emission
standards in this country?
Now, let me just turn to you, Dr. Lave, for 1 second. Your
full testimony had much more about nuclear. I'm in agreement
with you on that. One specific question. Should nuclear be
considered a renewable for the purposes of us considering this
legislation?
Mr. Lave. Senator, I would never answer a question like
that.
[Laughter.]
Mr. Lave. I think that we have enough uranium so that we
can generate a tremendous amount of nuclear power for now and
the future. Whether it is strictly renewable, in the sense of
going on forever, I think that's not true. But, if you were
looking at a century, or more than a century, there's certainly
enough uranium so that we could generate nuclear power----
Senator Burr. If we adopted reprocessing in this country,
we could--instead of storing 97 percent, using 3 percent, we
could use 97 percent and store 3 percent, which is, hopefully,
the conclusion that the study will come to.
I think you raised a very good point; we haven't built a
nuclear plant in some time, we don't know what the cost is.
I would sort of go back to where Senator Dorgan was. The
fact that we haven't proceeded forward is because we haven't
had a comprehensive blueprint of energy policy for the future.
I wish we could focus on that comprehensive energy blueprint
first, and figure out what that is and how all these pieces
fit, before we start creating the pieces. We may find out they
don't fit in the comprehensive energy policy that's in the best
interests of the country, both from a standpoint of security
and from a standpoint of cost-effectiveness.
I thank the chairman.
The Chairman. Thank you.
Next is Senator Landrieu, and then we have Senator Cantwell
and Senator Shaheen and Senator Lincoln. We're supposed to have
a vote at 12 o'clock. So, we'll just keep going.
Senator Landrieu. Thank you, Mr. Chairman.
I'd like to begin by associating myself with remarks of the
Senator from Tennessee, in a broad way, that I do hope that, as
we begin this debate, we can begin with a more unifying call
than something that could potentially, you know, divide our
country. I want to say how strongly I agree with him that, in
my 12 years in the Senate, I have not seen the country more
ready to embark in a new direction, but it has to be a
direction that makes sense to them, with clear and defined
goals.
I'd like to start, Mr. Chairman, with a visual that might
help us understand the challenges of what we're talking about
when we talk about wind. The latest generation of windmills,
using the most modern technology and construction material, are
almost 100 meters in diameter, they stretch higher than a 40-
story building, which is about half the size of the Eiffel
Tower. A windmill produces 1 megawatt of power when the wind is
blowing at a relatively high speed of 10 meters per second. It
would require 1500 of these windmills to produce the equivalent
power of one nuclear power plant, and it would take 90,000
acres, one wind farm, which is 144 square miles. By way of
comparison, Washington, DC., is only 68 square miles.
So, I just want to repeat that. Wind is very attractive.
I'm attracted to it. Most Americans are. Solar is very
attractive. But, there are some significant and real challenges
with wind. Land and space is just one of them.
The other challenge is a poster that I want to--and
aesthetics, may I say--the other challenge is represented by
this poster. In the Southeast, where I'm from, Louisiana, we
don't have much wind at all. Now, we're blessed with a lot of
oil and gas, and we have nuclear power, significantly, here,
and hopefully more. But, we virtually have no wind. We might
have some, offshore. That is exciting. We may have some tidal
energy, as well, which is in its infancy stages of development.
But, we virtually have no wind compared to the other parts of
the country.
I also want to hold up a visual about solar. While we think
we have a lot of sun, and it tends to be hot in Louisiana, we
don't have the same resources of sun and geothermal in the
Southeast.
Which brings me to the goal of what I think we should be
achieving or looking at, is where most Americans are; they're
excited about the possibility of being clean--not just
renewable, but clean--and secure. If there was any feeling of
the last election, it was that America has an opportunity to be
secure. If we address this in a broad way, sensitive to
regions, I think we might be able to achieve some significant
advancement. I'm not sure that this particular bill is the way
to get there.
Let me ask a question, to anyone who would care to answer
it. This is a Louisiana ratepayer's question. Under the
proposal that we have before us, that, in my view, puts too
much of an emphasis on wind and solar, not enough emphasis on
regional choices and menus that make sense, our ratepayers--let
me try to understand--would have to purchase large amounts of
renewable energy credits, primarily from solar and wind; but,
once they do that, is it not true that they still need to
generate power? We'll still buy our power from traditional
sources--coal, gas, and nuclear? So, aren't we asking, Mr.
Furman and Dr. Izzo, that our ratepayers, like other States,
would have to pay twice? We'd have to be buying the power for
renewables, and then also paying the regular rates to maintain
the current infrastructure that we have now, because it's not
going to go away.
Mr. Furman. Senator, no, I don't believe that's true. Let
me hold up a--it's small, but let me hold up--one thing that is
being missed in this entire debate is the massive biomass
resource that exists in the Southeast and the Upper Midwest.
This picture is from the National Renewable Energy Laboratory,
and it shows the biomass potential that could be delivered. So,
anybody in Louisiana, any utility ratepayer in Louisiana, would
have the option of either buying a credit from anywhere--the
Upper Midwest--or developing, within the service territory, a
biomass facility.
Now, some--a lot has been made about how expensive this
was. Senator Burr made reference to General Motors. The fact of
the matter is, this is all going to be market-driven. We will--
the benefit of this approach to a renewable energy policy is
that the market will be free to deliver the least expensive
option. So, yes, we will still need to be buying and consuming
electricity, just from the grid, but this provides a way for
the Nation, as a whole, to move its consumption of electricity
toward renewables, reducing demand----
Senator Landrieu. But, Mr. Furman, do you agree with Mr.
Jones that, under the current law that we are reviewing right
now, the current draft, that the biomass definition--or do you
say, Mr. Jones, the wood products--is not as clear as it could
be. I don't disagree that we have a lot of forests in the
Southeast, we also have the opportunity for biofuels. But, it's
the approach that we take. We are very excited about the
nuclear--expansion of nuclear. So, I think that we have to take
that into consideration.
But, I want to get this on the record. Do you agree that it
would take 1500 of these giant windmills to produce the same
power as one nuclear power plant? Do you agree that it would
take 90,000 acres, or 144 square miles?
Mr. Furman. I do not.
Senator Landrieu. OK.
Mr. Furman [continuing]. If I could clarify why. I think
the numbers that you gave, Senator, were a 100-meter tower and
a 1-megawatt wind turbine. In fact, a 100-meter tower is going
to be a 2- or a 3-megawatt wind turbine. So, we're typically
seeing 1,000 megawatts--if you want----
Senator Landrieu. So, instead of 144 square miles, it would
be two-thirds of that?
Mr. Furman. It would be less. It would be----
Senator Landrieu. A half.
Mr. Furman [continuing]. Significantly less. I think the--
the other thing that is interesting about how you look at
wind----
Senator Landrieu. Which would be about the whole size of
Washington, DC., not twice the size.
Mr. Furman. Yes.
Senator Landrieu. It would be the whole size of Washington,
DC.
Let me just end with this, Mr. Chairman. As a Senator who's
represented oil and gas, which is tough these days, I have to
hear my colleagues say to me, ``We don't want an oil and gas
facility anywhere near us.'' Now, I think they look pretty
nice, particularly at night. It looks like a Christmas tree to
me out in the Gulf. But, you know, I can appreciate that they
don't want to look at it. How are we going to get them to look
at these windmills, acres and acres and acres, mile after mile
after mile? I mean, I don't think they're ugly, but I don't say
they're any prettier than oil and gas fabrication facilities.
So, until someone really gets a handle on what the
landscape of this country is going to look like if we are so
determined to upstart a wind industry, as opposed to trying to
make America clean and energy-secure, I think that we have to
adjust our direction here.
Thank you.
The Chairman. Senator Cantwell.
Senator Cantwell. Thank you, Mr. Chairman.
Thank you, gentlemen, for your testimony. I've listened
with interest to my colleagues making various statements. I
guess I look at this issue a little differently, considering
the excitement around distributed generation. Just like the
change from mainframe computers to computers on a desk, the
same efficiency now can come from distributed generation, as
from centralized power plants and that is bringing the source
of energy closer to those that use it. It's more cost-
effective.
In that, I also think that we are missing some of the
issues about hidden costs. I mean, everybody always looks at
the cost of CO2, and we haven't quite put the price
tag on that here, legislatively. But, there are other issues. I
am thinking, Mr. Furman, of your testimony, particularly as it
relates to natural gas. Farmers in Washington State almost went
out of business over the price spike in natural gas in recent
years. We cannot continue to have natural gas go up to $14 on
whatever it was, and think that we're going to survive.
The electricity grid, with 50 percent of its power
generated from coal and a big chunk of it from natural gas, as
you pointed out, would benefit from a renewable portfolio
standard that would allow us to diversity our fuel mix. Would
it actually reduce the cost of natural gas by 15 percent as the
report says? Is that right, Mr. Furman?
Mr. Furman. Yes.
Senator Cantwell. So, that's a big advantage. That's a big
advantage to farmers all across America, if we can keep down
the cost of fertilizer. These pressures are going to continue
to grow. So, I think we have to include all the costs.
But, I do have another question. Mr. Jones, we tried very
hard, here in the United States Senate, to have our language on
``sustainable woody biomass'' prevail in the 2007 bill. We
weren't successful with the House in doing that, but we'll go
back and we'll try again.
But, my question is, given the current state of PTC-ITC
lack of credit flow, and given this discussion about RES, is it
possible to look at ways to make those regional projects more
cost-effective? We've been battering around loan-guarantee
concepts between the House and the Senate. Should we be looking
at meeting the RES standard with further incentives from the
government, something like low-interest loans amortized, maybe
over 30 years, with, perhaps Fed rate--near zero--that would
help, actually realize the cost-effectiveness for the
ratepayers of these projects in some of these regions?
Mr. Furman. Senator, if I could answer--there's no question
that all of those programs help, and particularly--you know,
our current problem is--the whole system of incentivization for
renewables has sort of broken down with the collapse of Wall
Street, and we're unable to monetize any of this. You know,
most of that benefit, if not all of it, does flow back to
consumers in the pricing that we provide to utilities.
Loan guarantees, I think, are, you know, definitely a help,
not just in incentivizing, but also in helping us to get
through this short-term problem that we have with the collapse
of the markets.
But, I think that, in terms of regional differences, which
is what you were, I think, alluding to----
Senator Cantwell. For the Northwest, with 72 percent hydro
and on the way for other renewables, yes, those are easier
challenges to meet. But, maybe part of RES is the ability to
get access to capital at a low rate to help drive down the cost
of some of these implementations.
Mr. Furman. There's no question that would help.
Senator Cantwell. Mr. Jones.
Mr. Jones. I would say, in the current writing of the
definition, the issue we're hearing from power companies that
are looking to my members to--as a resource in the Southeast
who are about to build biomass facilities, the issue they have
now is, Will landowners survive long enough in order to provide
that resource? The way the definition is written right now,
it's hard to site an energy facility and say, ``Where can we
put this energy facility where we know we'll have a guaranteed
supply of wood?'' That's stopping the financing of these
facilities, because the financing of these facilities are--
they're saying, ``Can you guarantee a supply of wood 3 years
from now?'' With the current market situation and where we're
going, that's tough to say. The way the definition is written
is a further constraint, because it's putting very narrow
boundaries on the amount of available wood that can be there,
when we have a lot of wood, but only a certain amount can be
utilized.
So, I would say, by broadening the definition, we can
definitely, hopefully, free up some incentives for these
facilities to come in and make the banks a little more willing
to make loans to their startup.
Senator Cantwell. The language that we had about
``sustainable woody biomass,'' that met the test?
Mr. Jones. I think when we talk about sustainability, we're
looking more at the forest health, so I think we could be
broader and just say that, you know, we just have ``all woody
biomass,'' that includes all plants and trees, and that would
help meet the test.
Senator Cantwell. Thank you.
Thank you, Mr. Chairman.
The Chairman. Thank you.
Mr. Lave, I'm informed that you need to leave to catch a
flight. We appreciate you being here, and we certainly excuse
you.
Senator Shaheen.
Senator Shaheen. Thank you, Mr. Chairman. Thank you, to all
of the panelists.
I certainly agree with several of you who have talked about
the need to move this country in a new energy direction that
uses more clean energy technologies and that that's not only an
environmental imperative and a national security imperative,
it's also an economic imperative. I think that a renewable
portfolio standard could be essential to doing that.
Two years ago in New Hampshire, we enacted an aggressive
renewable portfolio standard law that requires all utilities,
as well as competitive suppliers, to produce 23.8 percent of
their power from renewable sources by 2025. Now, one of the
reasons that we require competitive suppliers to do it is
because, when I was Governor, New Hampshire restructured its
electric industry to make generation of power a competitive
function. I'm sorry Dr. Lave is gone, because one of the
reasons we got to that point was because we built the last
licensed nuclear power plant in the country in Seabrook. That
gave us the highest average electric rates in the country. So,
trying to get to a more competitive power supply was important.
But, my question really is--and, Dr. Izzo, I would ask you
if you would take a crack at this first--should a national
renewable electricity standard apply to competitive suppliers,
in addition to utilities? Then, should it also apply to all
utilities? In New Hampshire, we have a number of municipal
utilities; they don't generate 4 million megawatt hours a year.
But, should an RES or an RPS apply to everybody?
Mr. Izzo. The answer to that is yes. The way we do that in
New Jersey is, we make it the burden of what we call the load-
serving entity, the company that owns the meter and the wire
into the home. So, when they require it of the supplier, the
regulator typically allows them to pass the higher costs from
the supplier--because it is higher cost--to their customer. It
works seamlessly. But, the short answer to your question is,
yes, it should apply to everyone.
Senator Shaheen. Can you talk a little bit about what you
think the consequences might be, if any, of not having it
applied to everyone?
Mr. Izzo. Besides the inconsistency, I mean, a ton of
carbon, whether it's emitted by a utility-owned generation
plant or whether it's owned by a competitive power plant or
whether it's owned by a municipal co-op or whether it's owned
by an IOU, is still a ton of carbon. Once again, if we are
going to give birth to some nascent industries here, whether
that's onshore wind, offshore wind, biomass, solar, the
economies of scale matter. So, why chip away at that? We're
talking about 7 percent of the 80 percent. We have a lot of
work to do here.
Senator Shaheen. Thank you.
The Chairman. Senator Lincoln.
Senator Lincoln. Thank you, Mr. Chairman. Mr. Chairman, I'd
note that the women have been hanging in here with you at the
end.
[Laughter.]
The Chairman. The women are the stalwarts of this
committee, I agree.
[Laughter.]
Senator Lincoln. We're hanging in there with you.
We want to thank, certainly, the chairman for bringing us
together on this issue, and getting started on this debate and
trying to figure out the solutions to the challenges that we
face. We thank you all for bringing your expertise to our area
of renewable energy.
Just a couple of questions. You know, I think we all agree
that we need to take steps to reduce our greenhouse gas
emissions. We need to encourage technology that's going to be
maximize the renewable resources available to us. But, I do
think that it's important for us to ask questions about how any
standards we do set will ensure equity among the various
regions of our country. You've heard that from so many of us.
We come from all different parts of this great nation. We all
feel like we have a tremendous amount to give, in terms of
contributions to solving this problem ut, we also feel very
strongly that we need to be recognized for the strengths that
we have, and not punished because of the weaknesses that might
exist in our areas.
In Arkansas, I'm extremely proud. We're contributing to the
supply chain for wind energy by manufacturing the blades and
the turbines. But, as Senator Landrieu showed you in that map,
we don't produce a whole heck of a lot of wind, except for
those of us that talk a lot.
[Laughter.]
Senator Lincoln. It is a critical part of making sure that
we are allowed to make our contribution to the solution.
Arkansas has great potential to contribute to a new energy
economy through biomass supply, not only in terms of--I think,
Mr. Jones, you mentioned the broad definition, in terms of what
the forest landowners and others can contribute--but
agricultural waste, animal waste, there's a whole host of
different things that we can do in different regions, but it
has to be recognized as a contribution in helping to solve that
problem, and I hope we will.
One of the things that hasn't been talked about an awful
lot today, and I would like to just bring up, and that is the
hydropower. In the current RES draft, the hydropower is
excluded from the base amount from which the percentages are
calculated. I've never really understood why existing hydro, in
this debate, is not given more credit as a renewable energy
source. It's something age-old that, for eons, civilization has
used as a power source. Any of you all want to try to give
somebody like me an explanation of why you think hydro is not
talked about more often?
Mr. Furman. Senator, if I could take that on. The goal here
is not to recognize, necessarily, existing resources, it's to
reduce carbon, it's to, you know, create jobs and economic
development, and it's to reduce our dependence on foreign
imports, now or in the future.
If we could do that, we could recognize existing hydro. I
think that, in order to accomplish those three goals, though,
you would have to raise the numbers in the RPS, in terms of the
targets.
Senator Lincoln. What if you take it away?
Mr. Furman. I'm sorry.
Senator Lincoln. What if you eliminate it?
Mr. Furman. Eliminate hydro?
Senator Lincoln. Uh-huh.
Mr. Furman. We----
Senator Lincoln. Existing hydro. Does that not set you
back, in terms of what you're trying to accomplish?
Mr. Furman. This legislation won't do that, though. The
existing hydro will continue to operate, just as the existing
coal and the existing nuclear will continue to operate.
Senator Lincoln. But, in terms of what you're saying, the
contribution of carbon--I mean, obviously, that doesn't exist
with hydro. In terms of, you know, taking that away as a source
of power that exists today, you're going to have to replace it.
I don't understand why it's not counted as something that is
basically neutral, in terms of the environment.
Mr. Furman. To be clear, we're not taking away the hydro.
All we're saying is, going forward----
Senator Lincoln. You're not going to count it.
Mr. Furman [continuing]. You have to add new renewables
into your portfolio.
Senator Lincoln. Uh-huh.
Mr. Furman. So, it will continue to operate. We're not
going to take it away. We're not going to even dis-incentivize
anybody from continuing to operate it. These plants are among
our least expensive resources in the country for providing
power, and I don't expect them ever to stop operating.
Senator Lincoln. If you quit supporting them, they will.
Mr. Furman. No, they'll still be paid for by the market and
by ratepayers. They will still be in the rate base, they will--
Bonneville Power Administration will continue to generate and
sell that power to the marketplace, and it will be very cost-
effective.
Senator Lincoln. I guess I tend to agree--disagree with
you, in the sense that, you know, when you don't support things
that, I think, are productive, then point in fact is, people
are not going to use 'them. If it's going to be a part of how
credits are traded and how people are evaluated, in terms of
what they produce, particularly regionally, then it's going to
become less and less of a viable source. People are not going
to make the investment. I know, certainly, in terms of hydro
facilities that exist today, it becomes harder and harder here
to be able to find the resources to make the repairs in, you
know, hydro projects that have been very, very successful and
productive over the years. Yet, you know, being able to make
the investment in the infrastructure for turbines and other
things that need to be replaced or reworked becomes virtually
impossible, and so, then you just lose that power.
Maybe we'll just have to disagree on that one. It seems----
Mr. Furman. I think we will.
Senator Lincoln [continuing]. Seems like--it seems like--as
I said, for eons it's been a great resource for mankind,
something that we probably should continue to focus on.
Mr. Jones, in the South, and certainly in Arkansas, the use
of biomass as a renewable energy, I think, must be utilized as
much as we can in order to meet any future RES standard that's
going to happen. There's an abundance of forest resources and
infrastructure for the potential to process our forest biomass
for energy use. You were concerned, I think, about the current
definition of ``renewable biomass.'' You've touched a little
bit on that. I know you mentioned to Senator Landrieu, there--
do you--anything else there that we need to be aware of?
Mr. Jones. Yes. The current definition that's being
proposed in this piece of legislation really takes an
agricultural or seasonal-crop approach to a long-term
investment, like trees, which won't apply.
Senator Lincoln. Right.
Mr. Jones. Basically, it's a closed-loop approach, which is
very difficult for a long-term investment, like growing a stand
of trees, to participate in. So, not only are we talking about
excluding natural forests, but we're also taking the wrong
approach to allowing them to participate.
Senator Lincoln. Do you believe it's possible for States in
the South to meet a strict renewable electricity standard if
forests are restricted from being used to meet the standard?
Mr. Jones. I don't think so. We've talked about the
regional differences, and Senator Landrieu's maps showed it
very well and very clearly, that we do have some resource
restrictions when it comes to wind and solar, but we do not
have those restrictions when it comes to biomass resources in
the South. You were correct to say that some ag products and
animal waste products go in there, as well. But, we have an
abundance of forest resources in the southeastern United States
that currently are losing their markets, the mills aren't
located where everybody can access them now. These energy
markets have the potential to set up right there, take a low-
cost--basically take small trees--these are small trees that
are being cleared out for--to increase forest health and manage
for a higher-value product, and also the byproducts of saw-
milling and waste from these manufacturing facilities. So, it
goes to help, not only landowners, but the manufacturing
facilities that we have, and preserve some of the jobs that are
currently being lost----
Senator Lincoln. Certainly----
Mr. Jones [continuing]. Through the reduction of industry.
Senator Lincoln. Certainly one of the issues there is
making sure there's parity, in terms of incentivizing these
types of fuel uses, as well. So, that's important.
Mr. Chairman, I'd just also like to add my comments, that
some of the other--my colleagues made, in terms of nuclear.
Arkansas has been very successful, because it has been a
diverse State, where it has used diverse power, whether it's
been woody biomass, whether it is nuclear, whether it's hydro,
whether it's coal, natural gas--we've tried to be--I think, set
an example, in terms of what needs to happen.
I would just echo the comments of some of my colleagues,
where we're not going to get from where we need to be unless we
ensure that we're going to be looking at all of the resources
that we have, certainly looking at them in a correct way,
making sure that we're using the most efficient and effective
ways that we possibly can, but making sure that we are
recognizing all of the resources that exist before us. So, I
hope we will, and particularly in terms of nuclear.
Thanks, Mr. Chairman.
The Chairman. Thank you.
Thanks, to all of you, for testifying. I think it's been a
very good hearing, and we appreciate it. We will proceed to
consider this further in the future.
[Whereupon, at 12:10 p.m., the hearing was adjourned.]
APPENDIXES
----------
Appendix I
Responses to Additional Questions
----------
Responses of David A. Wright to Questions From Senator Bingaman
Question 1. Does the inclusion of energy efficiency help?
Answer. Yes. Energy efficiency should be included in any discussion
about the need for clean energy. Energy efficiency reduces the need for
generation and should be considered as a substitute for renewable
generation in a RPS for areas where renewable resources may be limited.
It certainly should be included in any federal mandate for certain
mixes of energy sources. It should count as any other source and it
should not be constrained by bureaucratic hurdles that do not apply to
other energy sources (i.e. requiring a Governor to petition for its
use) nor should its use be capped in counting towards compliance with a
federal standard. While including energy efficiency will help mitigate
the cost impact for Southeastern consumers, it will not eliminate the
potentially significant cost of compliance with a Federal RPS.
(Alabama sent the following comment):
``If the overall intention of energy efficiency is to reduce
emissions, then the effect of energy efficiency is the same as the
production of zero-emission energy. The inclusion of energy efficiency
is therefore vital to this discussion. However, it is also vital to
appropriately and reasonably address the notion of minimum or maximum
energy efficiency requirements. Because of regional variations in
energy efficiency opportunity, states (and the utilities that serve
them) should be given sufficient latitude to determine the kind and
amount of energy efficiency measures to implement in their respective
jurisdictions.''
Question 2. I have been troubled that energy efficiency credits may
differ in value from program to program and from state to state. Should
such credits be tradeable like renewables credits? Should they be
limited to use for compliance only within the state that has petitioned
for the right to use efficiency credits?
Answer. While each state has different avoided costs which impact
the monetary ``value'' of an avoided MW or MWh, the same is true for
renewable generation. If Renewable Energy Credits are tradable so
should be Energy Efficiency Credits.
Energy efficiency should count like any other energy source toward
meeting a federal renewables mandate. Accounting issues will exist with
all fuel and energy sources and therefore trading of efficiency credits
should not be constrained anymore than those for wind, solar, etc.
My thought is that energy efficiency credits that are tradeable
from state to state would create a situation where the benefits of the
efficiency improvements are seen in one state and paid for by another.
These benefits would include not only lower emissions but decreased
need for new generation. My initial thought is that energy efficiency
credits, if used as a substitute for renewables, should be created and
remain within each state. However, a cost/benefit analysis should be
performed to consider the cost of an allowance created within the state
versus outside of the state along with the impact on generation needs,
emissions and lost revenues.
(A comment in response to this question from the North Carolina
Utilities Commission):
``If a national market is created for renewable energy RECs, then
it might not be inappropriate to allow a national market for energy
efficiency RECs in order to reduce to the greatest extent possible the
cost of compliance with a federal RPS.''
Responses of David A. Wright to Questions From Senator Murkowski
Question 1. How much back up power from conventional power plants
is needed to meet a 20% RPS requirement by 2021? At what cost?
Answer. This will depend on what mix of renewable resources are
used to meet the RPS. If all the resources are biomass, then very
little conventional power plants are needed. If all resources are wind
or solar, then anywhere from 75% to 100% back up is needed due to the
unpredictability of the resource. The cost of the backup, based on
adding simple cycle natural gas-fired combustion turbines to provide
the needed reliability, would be approximately $600-800/kW installed
(in 2008 dollars). The need for this much backup generation will most
likely be met through some combination of natural gas-fired
intermediate and peaking type facilities.
Most of the renewable resources defined by the majority draft RPS
that would count toward compliance are intermittent in their generation
output and have low capacity factors. A recent study titled the ``Joint
Coordinated System Plan'' (JCSP) was released by the Midwest ISO, PJM,
MAPP, the Southwest Power Pool and TVA. It confirmed that wind
generation has a capacity factor of 30%, requiring backup generation
for the remaining 70% of power needs. Solar generation's capacity
factor is typically even lower. This backup generation would almost
always be natural gas-fired combustion turbines or combined cycle
units.
This JCSP study examined the impacts of the eastern U.S. getting
5%, 20% and 30% of its electricity from wind. The study shows that to
meet the demand for energy in the Eastern Interconnection from 2008--
2024 with 5% wind would require the installation or import of 57,000 MW
of wind capacity while the amount to meet a 20% wind requirement would
require some 229,000 MW of wind. (At 2 MW each, this level would
require the installation of 115,000 windmills.) The study also shows
that each of these levels would also require the installation of
substantial amounts of natural gas-fired capacity above the base case.
The 5% wind scenario would result in the need for 46,500 MW of natural
gas capacity above the base case, and the 20% wind scenario would
require 67,200 MW of natural gas capacity.
Using 2008 EIA cost estimates for gas fired capacity, both wind
scenarios would require tens of billions of dollars of capital
investment above and beyond the costs of the renewable capacity.
Without significant improvement in storage technology, intermittent
renewable generation resources, such as wind and solar, are not
suitable to replace conventional base load generation resources.
Question 2. Do you agree that as it now stands, our country's
transmission infrastructure is woefully inadequate to achieve a 20% by
2021 RPS requirement?
Answer. Speaking nationally, you may be correct when you say that
our current transmission infrastructure is inadequate to support the
amount of new renewable energy that is currently being contemplated.
Without the necessary upgrades, the reliability of our nation's
transmission grid will constantly be a concern. Similar to what we saw
recently in Texas when the availability of wind generated electricity
suddenly dropped in a matter of minutes, operators will continually be
on heightened alert to ensure a constant and steady supply of
electricity generated from renewable resources, as well as back-up
capacity, is available.
The same is not the case in the Carolinas, however. While the grid
may not currently be constructed to wheel power from remote,
unpopulated locations in some parts of the country where there is a
great wind potential, it is adequate to handle biomass and distributed
generation, e.g., solar, without major upgrades. In the Carolinas, much
of the wind potential can also be accommodated without major upgrades.
The grid was never intended to deliver offshore wind power or wave/
tidal power, but even these sources may be delivered once the
infrastructure is added to get the power on shore.
The existing grid is highly reliable and serves its intended
purpose of delivering the most economic sources of energy to customers.
The impact of renewable resources should be addressed on a local or
regional basis, rather than attempting to overhaul the entire system.
Question 3. What are the estimated infrastructure costs to meet the
legislation's requirement? How realistic is it to get the necessary
transmission in place in time to meet the hard and fast deadlines of
the national mandate? Should Congress build some flexibility into the
program if inadequate transmission prevents compliance?
Answer. Yes, flexibility should be built into the program if
transmission capacity limits renewable resource availability within
individual states and to account for disparities in the amount of
renewable resources available within a given state.
The JCSP study cited above examined two different resource and
transmission paths to serve a total of 745,000 MW of coincident peak
load in the Eastern Interconnection (except Florida) in 2024. The
Reference Scenario, which assumes that present RPS requirements are met
with local on-shore wind resources, would add 10,000 miles of new extra
high voltage transmission at an assumed cost of approximately $50
billion. With 5 percent of the Interconnection's energy coming from
wind and 54 percent from base load steam generation, total energy
production costs in 2024 would equal $104 billion and total generation
capital costs would equal $674 billion.
In contrast, the 20 percent Wind Energy Scenario, which assumes a
20 percent national RPS requirement such as proposed in the majority
draft, would add 15,000 miles of new EHV transmission at an assumed
cost of approximately $80 billion if met by U.S. on-shore wind
development,. Under this scenario, energy production costs in 2024
would equal $85 billion and the capital cost of new generation would
equal $1,050 billion. These results should be viewed as illustrative or
``ballpark'' costs rather than definitive findings about the costs of
new transmission and generation related to either the status quo
expansion path or a high-renewables scenario. Even with that caveat,
the findings suggest that transmission overlays should be strongly
considered as a way to improve the future reliability and economics of
the nation's bulk power electric system under either policy path.
Siting new transmission infrastructure is a contentious issue that
needs to be addressed. If new transmission is not available, it will
not matter how much renewable energy is produced because that energy
will not be available for delivery. In that case, Congress needs to
ensure that states and consumers are not unfairly penalized for
something beyond their control.
(Comments in response to this question from the North Carolina
Utilities Commission):
``We have no estimates about infrastructure costs to meet the
proposed federal RPS. Although the development of renewable resources
in other regions has created a backlog of transmission interconnection
requests, we believe that we have adequate transmission planned or in
place in North Carolina to meet our REPS requirement (12.5% by 2021, up
to 40% of which can be met with energy efficiency savings) with in-
state or regional generation resources.''
Question 4. Given the different goals and definitions of renewable
energy in the various state renewable energy standard programs, how
does the majority staff draft ensure consistency and coordination of
the state and federal programs?
Answer. There is general consensus that the following resources are
considered renewable: solar photovoltaic; solar thermal; wind; biomass;
wave and ocean current. However the draft program does not recognize
the useful thermal energy created from a combined heat and power system
using a renewable resource, such as biomass.
While the majority staff draft does recognize the ability of states
to have their own RES programs it does nothing to ensure consistency
and coordination. In fact, if a state has an RES program that is in any
way different than the majority draft, then a utility in that state
will have to comply with both the state and federal requirement.
Currently some 28 states have RES programs and almost all are different
in some respect than the majority draft either in the definition of
what qualifies as ``renewable'', in percentage requirements, the level
of alternative compliance payments or in the timelines for achieving
levels of renewable energy. Each utility will be forced to comply with
both state and federal requirements even if different.
(Alabama sent the following comment):
``The majority staff draft should recognize the unequal
distribution of renewable resource potential as well as the unequal
distribution of load obligations throughout the country. Areas of low
renewable potential and high electrical demand are inherently
disadvantaged by nature of their resource allotment and the incumbent
economic base in their area. One size will not fit all.''
(Comments in response to this question from the North Carolina
Utilities Commission):
``It purports to require coordination, but doesn't practically do
anything to ensure consistency and coordination of the federal and
state programs. It includes its own definition of renewable resources
that may or may not coincide with a particular state's definitions. It
gives no credit for renewable generation that may be allowed in a state
but not in the federal definition. We have seen drafts [the House
draft, we believe] that are more limiting in the definition of biomass,
for example, such as limiting forestry residues to biomass on federal
lands. Some drafts do not include non-electric energy production such
as solar thermal and waste heat recovery, both of which are included in
the North Carolina REPS.''
Question 5. Do you agree that any federal RPS program must account
for the regional variations in the supply of renewable resources?
Answer. Yes. All states do not have the same amounts or levels of
renewable resources as defined in the majority draft. Therefore, unless
these innate differences are recognized, if a penalty kWh charge is
levied for non-compliance, or out of state RECs must be purchased to
satisfy the requirement, all that is being accomplished is a wealth
transfer. Even when regions have native resources (i.e., solar in the
west, wind in the mid-west, biomass in the Southeast) it makes no sense
to establish one standard for each region's resources. Any federal
mandate for energy sources must allow a region to take into account the
resources that economically exist in that region. Otherwise utility
customers are merely making payments for RECs or alternative compliance
payments that don't return any value to those same customers. As I
mentioned in my appearance before the Committee, a more logical
approach to a federal mandate than the majority draft would be to
require each state to adopt an RPS that is consistent with the energy
resources available in that state or region. That would make more sense
for the energy needs and utility ratepayers of that region.
(Alabama sent the following comment):
``Yes. If regional variations are not considered, then the
government would in effect be promoting economic discrimination in the
name of promoting renewable energy.''
(Comments in response to this question from the North Carolina
Utilities Commission):
``Any federal RPS program must absolutely account for regional
variations in the supply of renewable resources. While a federal RPS
may ignore state boundaries with regard to compliance, it must respect
the decisions of states which enact their own RPS to encourage
development of indigenous renewable resources.''
Question 6. I know you're concerned that the Southeast is penalized
under a national program because the region lacks sufficient wind or
solar power. Proponents of a federal mandate, however, insist that the
Southeast can meet the new requirement through the use of biomass. How
do you respond?
Answer. Biomass is a resource available in the Southeast, but its
use to generate 20% of retail sales is not practical. Those who say the
Southeast can comply with a RPS with biomass greatly underestimate the
amount of energy needed to provide 20% of retail sales, and they
overestimate the ability of biomass to meet the requirements. For one
thing, much of the biomass technology is currently in the research and
development stage, and not commercially proven as to operation or cost.
In addition, an estimate for the area of the Southeastern Electric
Reliability Council (SERC) shows that for the utilities in the region
to meet a 20% RPS with biomass would require some 17,500 MW of biomass
generating capacity. To fuel that capacity would require the annual
collection, transport and burning of almost 200 million tons a year of
biomass. To grow that much biomass would require tens of millions of
acres of land to be able to plant and harvest that many tons on an
annual basis. Such a commitment of land would not be practical and the
planting, harvesting and transport of such an amount would have
tremendous impacts of its own.
The December 2006 La Capra study, Analysis of a Renewable Portfolio
Standard for the State of North Carolina, found that North Carolina
could only achieve about 7% energy of its energy needs from biomass
(including wood and agricultural waste, landfill gas and animal waste)
by 2017. In Florida, the Navigant study, Florida Renewable Energy
Potential Assessment, showed that biomass (existing and new, but
excluding MSW, which does not qualify under the federal proposals)
could only provide up to 6 or 6.5% of the state's energy requirement by
2020 in the most favorable circumstances. In South Carolina, the La
Capra study estimated practical biomass potential to be about 4%.
Speaking specifically of the concerns I have heard from the state
of Georgia, while biomass is Georgia's best source of renewable energy,
it is also limited. Plant size is generally limited to less than 100
MWs, with fuel supplies coming from within 50 miles of the plant.
Building 2000 to 3000 MWs of biomass in Georgia may not be possible due
to limits on fuel supply. A study of the maximum biomass potential in
Georgia needs to be considered. Competition for fuel sources between
plants and with the pulp, paper and timber industry may drive prices
higher and may push industry out of the state.
(Alabama sent the following comment):
``This statement fails to consider the dangers of over utilization
of biomass and the corresponding impacts to those interests that
already rely on these resources. Alabama, for example, does have
substantial biomass resources that could be used for electricity
generation. However, to fully meet the Federally mandated RPS
requirements using biomass could require as much as 30% of the state's
commercial pine forest lands (roughly 2.8 million acres or 4400 sq
miles).
If Alabama generators attempted to meet the RPS requirement with
biomass alone, it would mean:
Wood prices in the South would rise enormously, just as the
price of corn did when this crop was converted from a food crop
to an ethanol crop.
Pulp and paper making in Alabama, and across the South,
would be severely threatened, potentially costing thousands of
jobs.
The cost of electricity would rise, imposing added costs on
families and businesses. Rising costs on businesses would, in
turn, eliminate more jobs in the region.
Rising cost of electricity would put the state and the
region at a considerable disadvantage in attracting new
industry because other sections of the country, blessed with
abundant solar and wind resources, would not experience the
same increases in costs.''
(Comments from the North Carolina Utilities Commission in response to
this question):
``No, we do not believe that North Carolina can meet the proposed
federal RPS standard solely through the use of biomass. North Carolina
adopted an aggressive REPS given the potential for renewable energy
development, including biomass, in the State. This also includes a
significant amount of wind energy development and an allowance for
energy savings from the implementation of energy efficiency measures.
Even so, the North Carolina REPS requirement increases only to 12.5%
(5% of which can be from energy efficiency)--far less than the 20-25%
proposed in drafts of federal legislation. As a part of its REPS, North
Carolina allows utilities to purchase renewable energy RECs from out-
of-state to meet up to 25% of their REPS requirement. We expect that
utilities will take advantage of this provision both for resource
availability and cost considerations.''
Question 7. Some dismiss the argument that the RPS will result in a
wealth transfer from areas of the country that lack renewable resources
to those that are blessed with them. As a state regulator, can you
explain why you believe a federal mandate will result in increased
rates for those in the Southeast?
Answer. The cost of energy produced by the limited renewable
resources in the Southeast is two to three times greater than the cost
of energy produced from traditional sources. Requiring the use of the
higher-cost renewable resources will increase the cost of power, which
will be recovered through rates paid by consumers. In addition, many
renewable resources such as wind and solar are intermittent and
therefore some amount of traditional capacity must be available to
backup these resources which will add additional cost. Another option
is to purchase RECs. But if a utility must purchase RECs to satisfy a
federal RPS and does not also get the kWhs of energy they represent, it
basically is paying twice for the energy needed to meet its customers?
needs. If it also receives the kWhs, it will be paying a premium for
such RECs and kWhs, thus driving up the price of electricity for that
state.
According to the draft proposal, excluding energy efficiency, there
are essentially three ways for a utility and its consumers to comply
with the renewable portion of the mandate: (1) build or contract for
renewable energy to be delivered to electricity consumers served by the
utility; (2) buy a renewable energy credit (REC) from designated
renewables placed in service after January 1, 2006; and/or (3) pay an
alternative compliance payment (ACP) of 3.0 cents per KWh.
Unlike other areas of the country, the Southeast is not blessed
with enough available resources for all the utilities to build or
contract for the amount of renewable generation that each of them will
be required to supply to their consumers under the majority's draft
proposal. While many supporters cite the availability of biomass as an
option, what those supporters fail to acknowledge is that there will be
competing interests for this fuel source. Congress recently increased
the mandate for renewable fuels, which means more will need to come
from cellulosic biomass. This will be on top of what the pulp and paper
industry already uses to produce its product. Add to that the need from
the energy industry and you are looking at substantial competition
among sectors for the same product. As we all know, when demand for a
product outpaces supply, prices tend to increase.
As a regulator my main concern is to ensure consumers are protected
and are provided with safe and secure low-cost electricity. This is
especially important in the Southeast where the cost of energy makes up
a significant portion of their monthly household budgets.
Because of the lack of available wind or solar resources, biomass
would have to be counted on for compliance. If biomass cannot provide
the amount of electricity that is required to meet the annual
requirement then utilities and their consumers will have only two
options available to them for compliance--either buy a REC or pay the
ACP. During testimony it was somewhat glossed over, but the fact is
that no electricity comes with the ACP or the REC. Therefore, consumers
will continue to pay, like they do today, for the electricity needed to
keep their lights on, but they will also be required to pay extra for
either the REC or the ACP under the new mandate.
Neither the REC nor the ACP will provide these consumers with any
additional benefit for what they are required to pay. Instead, the
required payment will either be sent to states that have the resources
available, helping them expand their economic development initiatives,
or go to the federal government for new government programs subject to
appropriations. To force consumers to pay additional costs, not because
they refuse to do something, but because they can't do it, seems
unjust, unfair and unreasonable.
Back in 2005 this Committee passed a mandate requiring a certain
amount of fuel sold in the U.S. to contain renewable fuel, such as
ethanol. And in 2007 Congress increased this mandate. A lot of people
support this mandate as a way to reduce our dependence on foreign oil,
and I think it can provide some context to today's debate on renewable
electricity. What if Congress changed the law and said that instead of
applying nation-wide, the mandate required fuel sold in each state to
contain a specific amount of renewable content--I assume there would
still be significant support for the program. Now, add that the
renewable content can only come from sources grown in that state and
can only be sugarcane, rice or cotton.
If the requirement is not met, then the federal gas tax is
increased by 2-3 cents per gallon. This, at its very core, is what
Congress and supporters of a one-size-fits-all renewable approach are
contemplating for the electricity sector--do it using these resources
or pay a penalty.
(Alabama sent the following comment):
``As currently proposed, the RPS defines renewable fuels only as
solar, wind, geothermal, ocean energy, landfill gas, biomass, and new
hydro. Solar and wind are not viable broad-scale generation
technologies in Alabama. Biomass has some potential, but even it is
limited. Given this, plus the fact that no consideration is given to
either nuclear or existing hydro, Alabama will be left with little
alternative but to buy its way into compliance through the purchase of
Renewable Energy Credits Alternative Compliance Payment. Unfortunately,
for Alabama, this reduces an RPS to nothing more than a transfer of
wealth or a tax.
Interestingly, and perhaps ironically, the Department of Energy's
own study ranks Alabama 6th in the nation and 1st in the Southeast in
the use of renewable generation. Importantly, this study takes into
account Alabama's existing hydro generation. generation that is
excluded under the proposed standard.''
(Comments from the North Carolina Utilities Commission in response to
this question):
``By definition, renewable generation requires a premium over
conventional generation in the Southeast. Otherwise, renewable
developers would not need a state or federal RPS to increase the amount
they are paid for their electric generation. If utilities are required
to purchase renewable generation as an alternative to conventional
generation, these additional costs must be passed through to their
customers--resulting in higher utility rates. States, if they desire,
should be allowed the freedom to develop indigenous renewable resources
to supplement conventional generation to support policies of improved
air quality and reduced carbon emissions. Stakeholders and policy-
makers in North Carolina, in adopting a REPS, have reached agreement on
how much consumers are willing and should be required to pay to fund
renewable generation yet avoid job losses due to increased electricity
rates.''
Question 8. In the Southeast, only North Carolina has adopted a
state renewable mandate. How does that program differ than the federal
program proposed in this draft legislation? How would North Carolina's
program, and its ratepayers, be impacted by the adoption of a federal
mandate?
Answer. The NC Utilities Commission authorized an independent study
to look at the feasibility of implementing an energy portfolio mandate.
It came to the conclusion that NC could implement a standard, but much
less aggressive than what is being contemplated at the federal level.
The NC standard has a more reasonable long-term goal of 12.5 percent by
2021 and more realistic interim requirements to meet this goal. Unlike
the majority proposal, the NC standard also has price caps--capping the
amount consumers will be forced to pay as a result of the policy.
When a federal standard is implemented, much of the investment
being made at the state level will be diverted in order to try and
comply with the federal requirement. When there are certain carve-outs
at the state level (like swine and poultry carve-outs in NC) investment
must continue in those areas even if they do not comport with the
federal standard. There will continue to be questions of how competing
standards can work together without the federal standard replacing what
the state has diligently put in place.
The NC REPS differs from the federal proposals in several ways,
including:
a lower requirement; the highest North Carolina REPS
requirement is 12.5%.
a higher allowed percentage from energy efficiency; up to
40% of the highest REPS requirement can be satisfied by energy
efficiency savings.
the presence of a monetary cap on compliance costs which
protects customers from excessive rates.
no alternative compliance payment.
the inclusion of solar thermal and waste heat recovery.
Because the federal proposals impose a substantially greater
RPS requirement and lack any cost cap, the costs to North
Carolina citizens will be much greater under the federal
proposals than the North Carolina REPS. RPS compliance costs to
North Carolina residential ratepayers could easily triple under
the federal proposals as compared to the NC requirements.
The NCUC has the authority to modify or delay the program if
that is in the public interest.
Question 9. You propose that before Congress moves forward with a
national RPS, we should first direct those states that don't already
have a program, to create one. Would the states support such an action?
If so, how quickly could states without current programs develop those
programs?
It is unrealistic to assume that states can meet the mandates of a
federal `one-size-fits-all' renewable policy. More than half the states
have passed some form of an advanced energy portfolio, but I do not
believe any of these programs directly align with what Senator Bingaman
and others are proposing. While some states have chosen to implement
energy portfolios, others have assessed their resources and decided
otherwise. As Senator Bayh indicated during the hearing, Indiana looked
at implementing a standard and chose not to. They concluded they did
not have the resources available for such a standard. So, is the
federal government simply going to tell those officials that they were
wrong and simply didn't look closely enough?
States are in the unique position to decide what is best for their
constituencies when it comes to delivering in-state electricity. They
are positioned to gather all the necessary information and make an
informed decision on what is available and how to provide incentives
for increased energy generation. North Carolina did this and is the
first southern state to implement a renewable standard. But North
Carolina, like other states that have implemented similar programs,
included a price cap on the amount the program could cost consumers. In
North Carolina the maximum annual cost of the program to each class of
customer is capped as follows:
------------------------------------------------------------------------
2015 and
2008-2011 2012-2014 thereafter
------------------------------------------------------------------------
Residential $10/year $12/year $34/year
------------------------------------------------------------------------
Commercial $50/year $150/year $150/year
------------------------------------------------------------------------
Industrial $500/year $1,000/year $1,000/year
------------------------------------------------------------------------
One way to ensure states move forward on implementing some type of
energy standard is to set a federal floor and then, like transportation
funding, have future federal funding for renewables tied to states
implementing a program that equals or goes beyond the federal level.
This carrot approach, as opposed to the stick mentality currently being
advocated at the federal level, would incent states to move forward as
quickly and as reasonably as possible without being punitive in nature.
(Alabama sent the following comment):
``Inherent in the notion that any State would develop its own RPS
is the assumption that is would do so in a way that makes sense for
that State. For Alabama, it is reasonable to assume such a program
would most certainly include existing hydro. It is equally reasonable
that such a program would be largely void of solar and wind
requirements. That being the case, given the requirements of the
current proposed Federal RPS, development of such a program would
appear to be an exercise in futility. If, however, State programs were
to be deemed as satisfying any Federal requirement, then such a pursuit
would be more worthwhile and would be more likely to gain support.''
(Comments from the North Carolina Utilities Commission in response to
this question):
``Each state should have the opportunity to decide what is
appropriate for itself given the diversity of resources available in
the state or surrounding region. In addition, states should be able to
assess how costly they are willing to let electricity become in order
to gain the advantages of renewable resources. State policy-makers are
accountable to the electorate for increases in the price of electricity
due to renewable policy. While Congress may wish to consider how best
to encourage states without and RPS to adopt such a program, it should
respect the decisions with regard to cost, resource eligibility, etc.
made in those states that have already adopted and RPS. Federal policy-
makers should respect the decisions already made in North Carolina and
other states regarding how much their citizens should be required to
pay for green energy and to what degree they are willing to accept
unbundled renewable energy RECs from out-of-state.''
Response of David A. Wright to Question From Senator Landrieu
Question 1. I know that we can achieve efficiency gains in both the
interstate transmission of electricity as well as the retail
distribution of electricity. In Sen. Bingaman's draft language that has
been circulated, it only allows for savings from the retail
distribution of electricity. Don't you think there are huge efficiency
gains to be made through efficiency upgrades to our transmission
backbone? Shouldn't that also be included in any efficiency portion of
a RES?
Answer. There are gains to be made in transmission grid efficiency,
and the savings should also be encouraged and recognized in any
efficiency portion of a RES. While losses on a transmission grid are
relatively low as a percentage of the power transferred, the magnitude
of the power transfers would produce significant savings for even small
gains in efficiency.
So the simple answer to this question is yes, but with
consideration given to cost-effectiveness, too. Recently, the subject
of increasing the reliability and efficiency of our transmission grid
has received a lot of attention, especially when it comes to connecting
renewable energy to the grid. The fact is, development of renewable
sources will be in rural areas and the electricity generated will need
to be transported over long distances to serve the load centers. At
this point it would seem that the transmission needed to carry
renewable energy to those load centers is just as important as erecting
the wind turbines or solar panels which would supply the power.
If this measure is truly intended to be a first-step in addressing
climate change, the question that needs to be answered is why should we
artificially limit the investment that utilities can make in energy
efficiency? According to the proposal, only 25 percent of the yearly
requirement can come from energy efficiency. This means that utilities
can only invest a certain amount in energy efficiency and then they are
required to re-direct investment to paying for needed RECs or ACPs. It
would seem more logical that utilities be allowed to meet as much of
the requirement as possible through energy efficiency. At least then
consumers of those utilities would see actual benefits from the
program. In the recently enacted stimulus package Congress provided
approximately $20 billion for energy efficiency. This shows that
efficiency is critical and it seems inappropriate for Congress on the
one hand to provide so much public funding for it, but on the other
hand limit the amount of investment by the private sector.
Additionally, since increased transmission is critical to bringing
new renewables onto the grid, it would seem that investment in
transmission upgrades should count towards achieving compliance with
the standard. In this way, the RPS requirement could be seen as a tax
liability and investment, up to a certain point, and could be used as a
tax credit--offsetting the costs associated with not achieving the
renewable amount required under the mandate.
(Alabama sent the following comment):
``Opportunities for energy efficiency gains, while most likely
yielding more potential at distribution levels, should not be limited
to those locations. Utilities should have the liberty to try and
achieve efficiency gains where they are most warranted (distribution or
transmission).''
(Comments from the North Carolina Utilities Commission in response to
this question):
``Utilities should be encouraged to increase efficiency in all
aspects of their operations, including electric generation,
transmission and distribution.''
Responses of David A. Wright to Questions From Senator Sessions
Question 1. What are we trying to achieve through a Renewable
Electricity Standard (RES)? What are the goals? By focusing solely on
renewables, are we limiting our options to achieve an adequate supply
of clean, low-carbon, reliable and affordable electricity?
Answer. Yes, by focusing solely on renewables, we are limiting our
options for achieving an adequate supply of clean, low-carbon, reliable
and affordable electricity. If the goal is to reduce carbon emissions,
and encourage clean, safe, reliable, low-carbon and affordable sources
of electricity, then other options such as nuclear power should be
included.
Our goal should be to encourage all clean energy sources to meet
our future energy needs. We should not focus only a narrow definition
of certain energy sources like wind, solar, biomass and geothermal.
That narrow definition does not even include all renewable sources
since the majority draft does not include hydro-electric energy.
The federal government should not pick winners and losers for
certain energy technologies. States and regions should be able to focus
on meeting their energy needs in ways that make the most sense for
their economies and ratepayers.
(Alabama sent the following comment):
``The goals of any Renewable Electricity Standard should be to
improve air quality, lower American dependence on foreign fuel sources,
and encourage clean, economical, dependable electric generation. To
achieve these goals, any Renewable Electricity Standard must include
and encourage the use of clean alternative fuels including nuclear
energy and clean coal technology. Any Renewable Electricity Standard
must ensure that States are given sufficient latitude to pursue the
inclusion of clean energy alternatives that make sense for their
individual economies.''
(Comments from the North Carolina Utilities Commission in response to
this question):
``Many states, in addition to the reduction of carbon emissions,
have enacted an RPS to support the following policy goals: (1) improved
air quality from reduced emissions from conventional fossil-fired
generating facilities; (2) increased energy independence through the
development of indigenous energy resources, such as wind, biomass,
solar, hydro, etc.; (3) increased economic development and increase of
local tax base from the construction, operation, fuel collection, and
other activities associated with indigenous energy resources; and (4)
the potential to attract manufacturers and other ``green'' jobs
associated with an increase in demand for renewable generation in the
state. A federal RPS with national markets for renewable energy RECs
supports none of these additional goals. Rather, it merely creates a
rush to purchase credits from wind-rich regions, thus straining the
transmission infrastructure in those regions while providing no local
economic benefit to those required to pay the bills. North Carolina has
already decided what its citizens are willing to pay for the benefits
of locally-sited renewable energy.''
Question 2. If the main concern surrounding RES is to have clean
energy then we should consider nuclear power. Nuclear power is produced
in the United States, it has zero carbon dioxide emissions, and it does
not put stress on agriculture products or the timber industry. Why has
this source not been considered in the RES discussion?
Answer. Nuclear power absolutely should be included in any
conversation about clean energy. Unfortunately, some supporters of a
federal RES also oppose nuclear power. Nuclear is the only base load
electricity source available that has zero emissions of greenhouse
gases or other pollutants. A federal RES that imposes the same standard
across the country will result in ratepayers in some regions sending
their money to purchase RECs or make alternative compliance payments to
the federal government. Such money could be invested in clean energy
sources like nuclear that can reliably and cost effectively serve those
areas.
Some environmentalists have refused to acknowledge that if the goal
is to reduce carbon emissions, nuclear generation is a cost effective
viable solution that must be considered. There is not one legitimate
argument to exclude nuclear. The concerns raised most often are
``safety'' and spent fuel storage. Regarding safety, this argument was
debunked decades ago. Nuclear generation for electricity and nuclear
powered military ships has been safely operated for over 40 years.
Regarding spent fuel storage, the US is obligated to take
possession and build a national repository. Even in the event this does
not happen, safe on-site storage is available and has been tested over
time. In addition, while the supply of uranium to fuel nuclear reactors
is finite, as reprocessing of used nuclear fuel becomes more prevalent
and economic, nuclear fuel becomes virtually renewable.
(Alabama sent the following comment):
``That nuclear energy has been excluded from this discussion is
indeed puzzling. Nuclear plants don't burn fossil fuels, therefore they
produce zero air emissions. Nuclear generation is the only large-scale,
clean-air electricity source that can be expanded widely to produce
large amounts of electricity in the Southeast in general and Alabama in
particular. Any Renewable Electricity Standard should focus on lowering
emissions and encouraging cleaner production of electricity. Clean
generation sources, like nuclear, must be part of any serious
discussion of this issue.''
(Comments from the North Carolina Utilities Commission in response to
this question):
``While it may be appropriate to credit nuclear energy in
greenhouse gas reduction policy, we did not find it necessary to
include nuclear power in the NC RPS. Nuclear energy is a relatively
mature technology and receives its own economic subsidies. Nuclear
generating facilities already provide a substantial amount of energy in
North Carolina and other states, and a number of new nuclear facilities
have been proposed. Nevertheless, we agree that the option for future
development of nuclear power must be maintained. One important hurdle
continues to be the inaccessibility of funds in the Nuclear Waste Fund
for the development of the Yucca Mountain repository. North Carolina
consumers are one of the largest contributors to that fund.''
Question 3. Why do you include energy sources that may yield some
benefit in the future and do not have any short term benefits, but
continue to exclude nuclear power that has both short term and long
term benefits?
Answer. SEARUC and the utilities in the Southeast support nuclear
power as a clean, reliable energy resource. As discussed in the answer
to your second question, I believe that all clean energy sources should
be utilized in meeting our future energy needs and that certainly would
include nuclear power.
(Alabama sent the following comment):
``Nuclear generation must be a part of any serious discussion of a
Renewable Energy Standard.''
(Comments from the North Carolina Utilities Commission in response to
this question):
``Just as with renewable energy resources, each state's decision
with respect to the extent of use of nuclear generation should be
respected. Utilities in North Carolina are looking at nuclear as well
as other options to meet their obligation to provide safe, reliable
power at a reasonable cost to consumers.''
Question 4. The US consumes approximately 1000 gigawatts of
electricity every year. The RES legislation would require approximately
200-220 gigawatts to come from renewable energy sources by 2020. What
percentage of the renewable energy mandate will be supplied by wind and
why does wind have a larger potential than other renewable sources such
as hydro or nuclear?
Answer. Wind does not necessarily have greater potential than
nuclear; however, nuclear power is not included in the list of eligible
resources listed in the draft proposals. While there are significant
wind resources in the U.S., not all regions of the country have readily
available, cost effective wind resources. The majority of potential
wind resources available in the Southeast are offshore and face
technical and economic challenges that on-shore resources in other
areas of the country do not.
It is difficult to say how much of a 20% RPS would be met with wind
in all parts of the country. Georgia tells me, very little will be
contributed by wind unless their utilities purchase wind tags from
other states.
Obviously states in the west and upper midwest would have a greater
ability to rely on wind to meet renewables requirements than other
regions. But, even in those states, as compared to other sources like
nuclear or hydro, wind would have a lower capacity factor and be more
unreliable. Wind generation will also require the installation of large
amounts of natural gas generation to provide the power when wind power
is not available. Recent studies have shown this could be up to 70% of
the time.
(Alabama sent the following comment):
``The Southeast in general and Alabama in particular, will be
virtually unable to rely on wind energy to meet any RES requirement. A
sustained wind of about 14.3 mph is the threshold for reliable wind
generation. The vast majority of locations in Alabama do not meet this
threshold.''
(Comments from the North Carolina Utilities Commission in response to
this question):
``While the potential for new wind development may be larger than
that of hydro (because of opposition to new impoundments and the prior
development of significant hydro resources), its potential is not
likely larger than nuclear. In addition, nuclear and wind have
different operating characteristics that do not make them comparable.
Nuclear operates at 95% capacity factor, while wind operates only when
the wind blows and cannot be relied upon to operate when its power is
needed. Thus, much more wind capacity is necessary to generate the same
amount of energy as from a conventional generating facility. Even then,
the actual generation from wind may be zero when needed on a hot summer
afternoon.''
Question 5. In your opinion, how will the Southeast states meet
their mandate requirements since wind is not a significant energy
source in this region?
Independent studies have shown the most readily available renewable
resource is biomass, primarily wood waste from the forest industry.
However, studies in North Carolina, South Carolina and Florida estimate
that biomass can practically provide only about 4 to 7% of utilities'
retail sales, leaving a significant gap to meet a 20% renewable
requirement. Solar generation would also play a part; however, solar
generation is currently one of the most costly renewable resources,
which may limit the amount installed due to other competitive renewable
resources available in other regions of the country.
I believe that the Southeast can meet limited amounts of the
proposed RES mandate requirements with energy efficiency and possible
conversion of some older coal plants to biomass, new construction
biomass including landfill gas, and also co-firing of existing coal
facilities with wood and/or agricultural waste. But, utilizing these
resources will increase costs to the ratepayer. Energy efficiency is
limited to 5% of the 20% mandate and it is not practical for biomass to
meet the 20% requirement either. I believe most of the compliance with
the federal RES in the Southeast will come from either purchasing RECs
from other regions or making alternative compliance payments to the
federal government.
(Alabama sent the following comment):
``Assuming that nuclear and existing hydro are excluded (which they
shouldn't be), Alabama will left with little choice but to resort to
the purchase of Renewable Energy Credits of payment of an Alternative
Compliance Payment (ACP). Biomass does hold some compliance opportunity
for the Southeast, but even it is limited.''
(Comments from the North Carolina Utilities Commission in response to
this question):
``Utilities in Southeastern states will have no option in meeting
such a high federal mandate but to purchase renewable energy RECs from
out-of-state or purchase credits from DOE''.
Question 6. How will a RES affect the price of electricity in
Southeast states?
A Federal RPS proposal, such as that proposed by Senator Bingaman,
could easily increase rates in the Southeast by 5 to 6%. More
aggressive requirements, such as the 25-by-25 proposal, could increase
rates by 11 to 15%. As noted in the North Carolina La Capra study,
costs are not scalable because higher RPS requirements will necessitate
greater use of higher cost resources.
Prices will increase if Southern states are required to build or
purchase renewable energy when other forms of energy are cheaper. It is
unavoidable that ratepayers will pay more for electricity due to the
imposition of a federal RES. Resources, like biomass, that are
available in the region have a higher cost than the current energy
sources of coal, nuclear and hydro. The gap between what can be
achieved with energy efficiency and biomass will have to be met by
either purchasing RECs from other regions or making alternative
compliance payments to the federal government. Billions of dollars will
be paid by ratepayers in the Southeast for this program. This could
equate to several hundred dollars a year in higher electric bills to
the individual ratepayer. This money will mostly be sent to other
regions or the federal government rather than being available to invest
in energy infrastructure to meet the future needs of the state or
region where the ratepayer lives.
(Alabama sent the following comment):
``An RES will cause electricity prices in Alabama to
rise.precipitously. Unfortunately, because Alabama would likely have to
comply with an RES (at least as currently proposed) through the ACP,
Alabama ratepayers will see absolutely no benefit associated with
compliance.''
(Comments from the North Carolina Utilities Commission in response to
this question):
See answer to Senator Murkowski, Question #7.
Response of David A. Wright to Question From Senator Mark Udall
Question 1. Currently, does each state rely exclusively or
substantially on fuels derived from that state to generate electricity?
Particularly for the Southeast, where does the fuel come from that
currently provides electricity generation?
Answer. This was an issue that was also discussed during the
hearing. Approximately 45% of the electric generation in the Southeast
is provided by coal, which is procured predominately from the central
and northern Appalachian region. 35% is provided from nuclear
generation and the balance is from natural gas, oil and other sources.
While a great deal of the fuel used to generate electricity comes
from out-of-state, there are significant differences in relying upon
out-of-state traditional fuels as compared to relying upon intermittent
renewable resources to generate electricity in another region of the
country which is then delivered over transmission lines.
1) The total cost of electricity generated from coal and
uranium is very economical compared to the total cost of
renewable resources.
2) Supplies of coal and uranium fuel can be managed to
maintain sufficient fuel inventories to ride through high
prices and/or supply disruptions and continue to generate low-
cost electricity. The delivery of renewable-generated
electricity from some other region over transmissions lines is
not as reliable due to the intermittent nature of renewables
such as wind and solar, and also because delivery of the energy
is subject to interruption due to transmission line outages
resulting from storms or other causes.
3) The cost of the additional transmission lines necessary to
deliver large amounts of energy from another region will be
costly, and siting of the lines will be controversial and time
consuming.
4) The transmission of electricity over long distances, such
as from the Midwest to the Southeast, would result in
significant electrical losses which will reduce the amount of
electricity actually delivered, These losses are avoided when
electricity is generated in closer proximity to load centers
where it is delivered to end-use customers.
5) Although the fuel is imported, the investment in
generation, transmission and distribution remains in the state
and creates jobs in the state. Such is not the case with
renewable resources located outside the state.
While it is correct that coal, natural gas and uranium are imported
by states for generation purposes, it is usually more cost effective to
transport fuels such as uranium, coal or natural gas than to transport
electricity. That is why generation has almost always been built near
the load. In addition, it does not follow that wind and other renewable
resources could be substituted for current electric generation in these
states. Under this theory wind or solar would have to be imported and
then used to generate electricity to displace the current generation in
a state--which cannot be done.
Even if the transmission capability existed to import all the
electricity required to meet the standard, it would be at an increased
cost to consumers and would not provide the local economic benefits
that electricity generated in-state would carry. Also, if the RES is
supposed to be a step to reducing carbon then why not look at nuclear
generation? Increasing the amount of nuclear generation would increase
local economic development and increase local job creation, both during
construction and long-term plant operation.
As I have stated in previous questions, the REC or the ACP does not
provide any electricity. Therefore, customers in those states that lack
renewable resources would still have to rely on their current electric
generation in addition to paying the costs for the REC or ACP, all for
no additional benefit.
(Alabama sent the following comment):
``Many states meet a material amount of their electric generation
fuel needs within their state. Alabama is no exception, and sources
much of its fuel needs from in-state coal, natural gas, hydro, as well
as some biomass from customer owned generation facilities. In the
United States electrically utilities source almost all of their fuel
needs within the country. This is largely due to the reliance on and
abundant availability of coal within the United States.''
(Comments from the North Carolina Utilities Commission in response to
this question):
``Utilities in North Carolina primarily rely on coal, nuclear, and
natural gas for electric generation--each of which is purchased from
out-of-state. This, in part, led North Carolina to adopt an RPS to
support development of indigenous energy resources, such as small-scale
hydro, solar, wind, and biomass. In addition to the increased energy
independence, development of in-state energy resources provides for
local air quality improvements and local economic development. The
difference between purchasing fuel from out-of-state and purchasing
renewable energy RECs from out-of-state is that in the latter case
consumers are incurring an additional cost with no additional
benefit''.
______
Responses of Ralph Izzo to Questions From Senator Murkowski
Question 1. How much back up power from conventional power plants
is needed to meet a 20% RPS requirement by 2021? At what cost?
Answer. The amount and cost of backup energy that will be necessary
is dependent on many variables, including what type of renewable
generation is developed and where it is located. Therefore, it is
difficult to predict with much accuracy how much back up power would be
needed, and at what cost. Some types of renewable generation, such as
biomass or geothermal energy deliver consistent and reliable power and
can be treated much like traditional generation assets. Intermittent
renewable generation resources will need back up power at times, but
with a diversity of generation resources, the use of demand response,
and improved energy storage technologies--such as batteries or
compressed air storage--we can improve reliability and help minimize
any additional cost.
Question 2. Do you agree that as it now stands, our country's
transmission infrastructure is woefully inadequate to achieve a 20% by
2021 RPS requirement?
Answer. Whether or not our transmission infrastructure is adequate
to support 20% renewable generation depends entirely on where renewable
generation is built. For example, with significant growth in offshore
wind generation located close to electric load centers in the
Northeast, you could expand our nation's renewable resources
significantly without major new transmission infrastructure.
Question 3. What are the estimated infrastructure costs to meet the
legislation's requirement? How realistic is it to get the necessary
transmission in place in time to meet the hard and fast deadlines of
the national mandate? Should Congress build some flexibility into the
program if inadequate transmission prevents compliance?
Answer. The scale of necessary infrastructure upgrades will depend
on where the renewable generation is built. The time and expense of new
transmission is a factor that should be considered in such decisions.
For example, currently offshore wind is more expensive to build than
onshore wind, but when the associated time and expense of transmission
is considered, offshore wind becomes a more attractive investment. By
creating an open national market for renewable generation credits and
allowing for alternative compliance payments, I believe the majority
staff draft builds in the necessary flexibility to deal with these and
other complicating factors.
Question 4. Given the different goals and definitions of renewable
energy in the various state renewable energy standard programs, how
does the majority staff draft ensure consistency and coordination of
the state and federal programs?
Answer. The majority staff draft sets the appropriate framework for
coordinating state and federal programs. As I understand it, credits
for state RPS requirements can be used to meet the federal obligation,
as long as they are generated from a renewable resource that meets the
federal definition of renewable energy. Some details about federal and
state coordination remain to be worked out, but that should be
addressed by subsequent regulations promulgated by the Department of
Energy.
Question 5. Do you agree that any federal RPS program must account
for the regional variations in the supply of renewable resources?
Answer. I believe the majority staff draft does account for
regional variations in the supply of renewable resources by creating a
national market for renewable energy credits, allowing states to
purchase credits from the least cost renewable generation anywhere in
the country. Each region has its relative strengths and weaknesses with
regard to renewable resources, which will be reflected in the types of
investments that are made in each region. Furthermore, each state
remains free to enact policies to develop local renewable energy
industries.
Question 6. I understand that in order to meet New Jersey's 22.5%
RPS requirement by 2020, offshore wind would need to provide 48% of the
renewable energy. According to reports, that means you need at least
1,000 megawatts generated by offshore wind turbines by 2012 and at
least 3,000 megawatts by 2020. Given that we still have no offshore
wind power production in this country--and this despite several years
of effort on the Cape Wind proposal--such a scenario seems wildly
optimistic. How do you respond?
Answer. Governor Corzine has set a goal of 1,000 MW of offshore
wind by 2012 and 3,000 MW by 2020. The State is developing a series of
policy initiatives to help New Jersey reach that goal. PSEG is
currently developing a 350 MW offshore wind project that will be
supported by these state policies. We believe that Governor Corzine's
leadership on this issue, will allow us to overcome existing barriers
to offshore wind and develop an industry that will create local jobs,
improve air quality and reduce carbon emissions.
The state's offshore wind initiative will help New Jersey meet its
RPS; however, offshore wind is not essential for New Jersey to meet its
RPS targets because New Jersey's standard can be met with any renewable
generation within PJM, our regional electric grid. Thus far, New Jersey
has fully complied with its RPS through the development of renewable
generation throughout PJM.
Question 7. How is the financial crisis impacting your company's
planned renewable projects? I understand that PSEG anticipates cutting
back its expected investments on some wind and solar projects.
Answer. What is the status of PSEG's Solar Initiative? In 2007,
your company introduced a $100-million plan to spur the investment of
solar systems on homes, businesses, and municipal buildings. This
program was to help you fulfill 50% of your RPS requirements for 2009
and 2010. Do any of these problems at the state level signal a need for
greater flexibility in a federal program?
The financial crisis has forced every company to reevaluate its
capital spending, and PSEG is no exception. However, we are moving
ahead with the renewable energy projects we have previously announced,
and New Jersey is continuing to meet its RPS requirements.
The renewable energy projects PSEG is pursuing include a 350-
megawatt offshore wind farm. We are also continuing to implement our
$105 million solar loan program, which is poised to help finance over
11 MW of solar generation projects. And we recently announced a
proposal for our utility to invest in nearly $800 million of solar
generation on government buildings, low-income housing, brownfields and
utility poles. These investments are driven by our state RPS, and we
believe such investments are particularly important during an economic
downturn as they can create jobs and help stimulate our local economy.
Question 8. Would it be correct to say that your state regulators
carefully analyzed the needs and available resources in New Jersey in
the course of developing its RPS policy?
Answer. Our state RPS can be fulfilled with renewable generation
located anywhere in PJM, our regional electric grid (with the exception
of our solar carve out, which must be met with New Jersey-based
generation). Therefore, in evaluating our state RPS, our regulators
focused on evaluating the available renewable resources located
throughout the PJM region.
Question 9. It is my understanding that the New Jersey 22.5% by
2020 RPS requirement is subdivided into different classes of eligible
resources--Class I (solar, wind, biomass, and a few others); Class II
(small hydro and ``resource recovery facilities''); and a requirement
that solar comprise a certain percentage of the total.
Answer. New Jersey's structure obviously differs from the majority
staff draft. How do you believe the differences between the federal
program and New Jersey's program should be resolved?
I do not believe these differences need to be resolved because, as
I understand it, the majority staff draft does not preempt states from
pursuing their own state standards, which may include different
definitions of renewable energy than the federal standard. This will
add some complexity to efforts to coordinate state and federal
programs, but I believe these issues can be resolved through the
regulatory process as the Department of Energy develops rules for
coordinating state programs.
Question 10. Is it fair to say that the adoption of a federal RPS
will create investment opportunities for your company?
Answer. A federal RPS would create business opportunities for any
company that wants to invest in renewable generation. In turn, this
will create jobs and provide stimulus for our economy.
PSEG's core businesses are an electric and gas distribution
utility, a nuclear generation company and a fossil fuel generation
company, which includes both coal and natural gas powered generation
assets. We are beginning to grow both a regulated and unregulated
renewable generation business, but these businesses are in the early
stages of development. However, we see renewable energy as part of our
long-term growth strategy.
Question 11. Is it correct that you believe nuclear energy is vital
to a carbon-constrained future and that all options must remain on the
table?
Answer. Yes. If we are to reduce carbon emissions 80% by 2050, we
need to aggressively pursue energy efficiency, renewable energy and
clean central station power, such as nuclear generation. I believe an
RPS is the best policy to directly support renewable electric
generation. Different policies should be used to support energy
efficiency and clean central station power.
Question 12. In 2007, before the financial crisis, you were quoted
in New Jersey Business as saying:
. . . we are asking people to sacrifice in exchange for the
environmental benefits. For some customers, the choice might mean not
buying the extra sail for the boat. For others, it might mean not being
able to put that third meal on the table. Some people are more
concerned about meeting today's bills than being concerned about carbon
dioxide levels 100 yeas from now.
I'm not concerned with the guy who can't buy a new sail for his
boat, but we're all concerned with asking people already hard hit to
choose between energy and putting meals on the table. Is this a fair
choice?
Answer. PSEG serves the majority of New Jersey's low-and moderate-
income families, and I am concerned about their ability to pay for
green investments. As I said in my testimony, in the long run investing
in renewable energy will be a net benefit for customers, but in the
short run it will be more expensive.
In the worst case scenario, by 2021 the majority staff draft would
impose an additional three cents per kilowatt hour on 20% of our
electricity, or an additional 0.6 cents on all of our electricity.
Presuming we have 10 cent electricity that would mean an increase of
roughly 6% in 2021, or approximately 0.5% per year. For most families
this cost is manageable, but for families struggling to make ends meet
it will be an added burden.
PSEG is a strong proponent of LIHEAP and state-based programs
designed to help customers pay their energy bills, because no family
should be forced to choose between heat and putting food on their
table. We also strongly support energy efficiency programs targeted at
low- and moderate-income families. Our utility is beginning to
implement such programs in our urban areas to help families reduce
their bills.
Response of Ralph Izzo to Question From Senator Landrieu
Question 1. I know that we can achieve efficiency gains in both the
interstate transmission of electricity as well as the retail
distribution of electricity. In Sen. Bingaman's draft language that has
been circulated, it only allows for savings from the retail
distribution of electricity. Don't you think there are huge efficiency
gains to be made through efficiency upgrades to our transmission
backbone? Shouldn't that also be included in any efficiency portion of
a RES?
Answer. I agree that we could make efficiency improvements in both
our transmission and distribution systems. I believe, however, that the
RPS should be used exclusively to promote renewable generation, and
that other federal policies should be developed to incent investments
in energy efficiency. Both are needed.
Responses of Ralph Izzo to Questions From Senator Sessions
Question 1. What are we trying to achieve through a Renewable
Electricity Standard (RES)? What are the goals? By focusing solely on
renewables, are we limiting our options to achieve an adequate supply
of clean, low-carbon, reliable and affordable electricity?
Answer. I believe the goal of the RPS is to increase our use of
renewable electric generation and to develop industries that will
benefit our environment and economy for generations. And as we
electrify our transportation sector, renewable electric generation will
become critical to America's energy security.
To make the reductions in greenhouse gas emissions that scientists
say are necessary to avert catastrophic impacts from climate change, we
need a portfolio of policies. This should include a national carbon
cap-and-trade system, adequate incentives for new nuclear generation,
programs to promote energy efficiency, and a federal RPS that will
drive demand for technologies that will transform the way we generate
electricity.
Question 2. If the main concern surrounding RES is to have clean
energy then we should consider nuclear power. Nuclear power is produced
in the United States, it has zero carbon dioxide emissions, and it does
not put stress on agriculture products or the timber industry. Why has
this source not been considered in the RES discussion?
Answer. I agree that nuclear power has to be part of our climate
change solution. However, nuclear power is not a renewable resource.
Moreover, the challenges for building new nuclear are different than
the challenges of growing renewable energy industries. Nuclear power
requires a very large, up-front capital investment; it has a very long
construction time; and it faces unique regulatory hurdles. We need
federal support for new nuclear generation, but that support is not
best delivered through an RPS.
Question 3. Why do you include energy sources that may yield some
benefit in the future and do not have any short term benefits, but
continue to exclude nuclear power that has both short term and long
term benefits?
Answer. Please see the answer to question #2 above.
Question 4. The US consumes approximately 1000 gigawatts of
electricity every year. The RES legislation would require approximately
200-220 gigawatts to come from renewable energy sources by 2020. What
percentage of the renewable energy mandate will be supplied by wind and
why does wind have a larger potential than other renewable sources such
as hydro or nuclear?
Answer. It is difficult to predict with any accuracy the percentage
of the RPS that will be fulfilled by any one generation technology. At
this point, onshore wind is among the most cost-competitive renewable
generation resources, so we would expect a significant percentage of
the RPS to be met with onshore wind. However, as the RPS drives
investment into renewable energy industries we could see significant
improvements in the capacity factors and reductions in the production
costs of other renewable energy technologies, making them more
competitive.
Nuclear and hydro power constitute a far greater percentage of our
current electric generating capacity than any of the other technologies
eligible under the majority staff draft bill; however, there are unique
challenges to expanding our reliance on either nuclear energy or hydro
power. Therefore, it is difficult to compare the relative potential of
nuclear power, hydro and onshore wind. But all forms of carbon-free
electricity will be needed to reduce emissions 80% by 2050.
Question 5. In your opinion, how will the Southeast states meet
their mandate requirements since wind is not a significant energy
source in this region?
Answer. It is difficult to predict specifically how different
states will comply with a federal RPS, particularly over the long term.
As some of the maps that were entered into the record indicate, the
southeastern states have considerable potential to develop biomass
generation. In addition, state policies can drive investment in certain
renewable technologies. For example, because of state policies, New
Jersey is second in the nation to California in solar installations
despite having relatively weak solar energy resources. To the extent
that local renewable generation resources are not sufficient to meet
the federal RPS, all states will be able to purchase the lowest cost
renewable energy credits from anywhere in the country.
Question 6. How will a RES affect the price of electricity in
Southeast states?
Answer. With the exception of states that are already paying for
state RPS programs, the cost of complying with the RPS should be fairly
equal in all regions of the country. This is because the majority staff
draft sets up a national renewable credit trading system, under which
all states will have the opportunity to buy renewable credits from the
least-cost renewable generation resources in the country.
Response of Ralph Izzo to Question From Senator Menendez
Question 1. Dr. Izzo, as you know New Jersey has a specific carve
out for solar technology in its Renewable Portfolio Standard. You have
testified that you do not believe there should be a carve out for a
specific technology, such as solar, for a national Renewable
Electricity Standard. I do not agree, but I can understand how one
could think that a national standard should not single out one
technology in this manner.
I am concerned, however, that the RES proposal before us would
drive investment only for onshore wind. If we rely so heavily on one
technology I believe that in a decade or so we would regret such a
policy because the best land-based wind resources can only take us so
far.
One way to ensure a wide variety of technologies are incentivized
by a National Electricity Standard would be to include a reverse carve
out. This would mean that no one technology could be used to fulfill
more than a certain percentage of the RES. Such an approach could help
spur distributed sources of generation, biomass, offshore wind,
geothermal, and a host of other technologies. Would you support a
reverse carve out in a national Renewable Electricity Standard?
Answer. Yes I would. As I said in my testimony, it is important
that we use the RPS and other tools to support a range of technologies
in our effort to decarbonize our electric generation. If we establish a
strong, federal RPS, I believe it will create a flourishing national
market for renewable generation, which I expect will drive investment
toward a number of renewable technologies. However, a reverse carve out
would be a sensible backstop to ensure that the RPS does not almost
exclusively support a single technology.
Responses of Ralph Izzo to Questions From Senator Mark Udall
Question 1. Each region of the U.S. is blessed with excellent
renewable resources. If wind power potential is not very good in the
southeastern U.S., does that mean that utilities in that region of the
country will be unable to provide their customers with electricity
generated from renewable resources under a RES?
Answer. No. The majority staff draft would allow states to meet the
RPS requirements either with the development of local renewable energy
resources, or by purchasing renewable energy certificates generated
anywhere else in the nation.
Question 2. During the Bush Administration, the Energy Information
Administration analyzed several different national RES legislative
proposals. In each case, EIA determined that biomass would receive the
most RES credits of any renewable technology eligible to receive
credits. Please identify which regions of the country have the greatest
biomass potential.
Answer. Analysis by the National Renewable Energy Laboratory
indicates that there are strong biomass resources in the West, Upper
Midwest and Southeast, along with pockets of biomass potential in
various other states throughout the country.
Question 3. If the U.S. were to generate up to 25% of its power
from renewable resources, how would this impact our country's reliance
on natural gas to generate electricity?
Answer. If the U.S. generated 25% of its electricity from renewable
resources, that would reduce demand for electricity generated from
traditional resources. Analysis from the Energy Information
Administration shows that the decreased demand for traditional
generation would reduce our demand for, and reliance on, natural gas.
Question 4. If the country switches to plug-in hybrids to power our
automobiles and also adopts a 25% national RES, what would the impact
be on oil and gas imports over the next 25 years?
Answer. Transitioning from gasoline-powered cars to electric cars
is crucial for our long-term energy security and our efforts to reduce
demand for foreign oil. But as we electrify our transportation sector,
it will become increasingly important that we decarbonize our electric
generation so that we can reduce our carbon emissions. If we can pursue
these two goals in tandem, we will reduce oil imports, reduce demand
for natural gas, reduce carbon emissions and increase our energy
security.
______
Responses of Lester B. Lave to Questions From Senator Bingaman
Question 1. You argue that we should include nuclear power and coal
with carbon equestration in our standard. I we did so would we not have
to make this standard much higher in order to achieve within it the
goals that we would hope for with those technologies?
Answer. You are correct. If an RES contained nuclear and CCS, it
should be much larger than 20%. I favor including more ``reduced
carbon'' technologies in the standard in order to allow greater
flexibility for states that don't have one or another of the resources.
The proposed legislation singles out several technologies as being the
answer to social concerns including carbon-dioxide emissions,
sustainability, air pollution emissions, energy security, and
environmental quality more generally. Renewable do help meet some of
these concerns, but they are not the only technologies for doing this
and, in many cases, are neither the most effective way of reducing
carbon-dioxide emissions nor the least cost way of providing the
electricity.
While I believe that renewables will become an essential part of
the way of attaining these goals, along with energy efficiency, one
clear lesson from the 1970s is that the market place, not Congress or
the Department of Energy, should choose the winning technologies.
Congress and DOE must make decisions about R&D, but this is quite
different from mandating that a technology be deployed.
While I am concern about energy security, general environmental
quality, and sustainability, these are not large problems for
electricity generation at this time. Congress and EPA have firm control
of general environmental quality; I see no need to press for renewables
to improve general environmental quality. Sustainability is not the
highest priority now, since we have adequate uranium and coal
resources. Natural gas could become a sustainability concern, if the
shales do not produce as much natural gas as some project. Thus, my
primary concern for electricity generation is carbon-dioxide emissions.
I support and urge Congress and DOE to adequately fund basic
research on photovoltaic technology and battery technologies. Both are
key to our future, but neither is sufficiently developed for commercial
success in baseload generation (photovoltaic) or applications such as
plug-in hybrid vehicles or electric vehicles.
Question 2. If you acknowledge that the main obstacles to nuclear
power are lack of a solution to the waste problem, concerns over
proliferation of nuclear weapons, and costs, what is it that the RES
does to resolve those difficulties?
Answer. All technologies for producing electricity have
difficulties. Through regulation we need to handle these problems,
whether they be proliferation, spent nuclear fuel, or greenhouse gases.
I am optimistic that we can, save possible for proliferation. If we
cannot prevent nations wanting nuclear weapons from getting then from a
nuclear reactor program, we have to ask whether we could stop them from
getting nuclear reactors. I do not think that we can. Thus, while I am
concerned about proliferation, I do not see that there is much that we
can do about it. President Carter stopped fuel reprocessing in order to
present a model to other nations. Perhaps that worked for a time, but
is not working now.
The largest issue is going to be competition among the technologies
for generating electricity. If nuclear power plants are cheapest for
some regions, there is little that we will be able to do to stop other
nations for building them.
Question 3. If you expand the RES to push the development of
sufficient nuclear power, and the problems currently preventing nuclear
plant development are not resolved would not you then have an
unworkable RES?
Answer. If, as you suggest in question 1, we included nuclear and
efficiency in the RPS and expanded its scope, and if nuclear proved to
be non competitive, there would be greater difficulty in meeting the
RPS. However, that would be the real world. If we are to lower
greenhouse gas emissions, we need to find a combination of generation
and efficiency that does not. Nuclear should be helpful, but if it
isn't, we still need to lower greenhouse gas emissions.
Question 4. If you don't expand the RES but include nuclear power
and those problems are resolved, would this standard result in anything
other than what was going to happen anyway? Would more new renewables
be built?
Answer. This question amplifies the previous two questions. The low
carbon technologies should compete. If nuclear is the cheapest, it
should dominate. The price of electricity is important for both
consumers and business. If renewables are competitive, they will be
deployed. If not, I am not clear why we ought to mandate their
deployment.
I want to qualify that statement in the sense that I want a
portfolio of generation technologies. Fuel prices and environmental
concerns change over time and so it is prudent to have a portfolio of
generation technologies, even if one appears to be cheapest at this
time.
Responses of Lester B. Lave to Questions From Senator Murkowski
Question 1. How much back up power from conventional power plants
is needed to meet a 20% RPS requirement by 2021? At what cost?
Answer. There would be almost no reduction in the need for backup
capacity (dispatchable capacity) if there were a 20% RPS. The amount of
generation capacity needed depends on the peak demand (with a margin
for safety). Renewables would lower the amount of fossil, hydro, and
nuclear generation capacity needed only insofar as they could be
depended upon to generate power during the peak hours of the year. In
most areas of the USA, peak demand occurs between 5 and 6 PM on the
hottest summer day. That is generally a time when there is little wind.
Although solar energy is high on those days, the sun is low enough to
the horizon by 5 PM that it is generating little electricity.
Solar thermal arrays might be constructed to provide some
generation during these periods by storing heat. Alternatively, if
there were cheap bulk storage of electricity, wind and photovoltaic
electricity could be stored for peak demand. However, with current
technology, wind and solar would relieve little of the need for
``dispatchable'' capacity, capacity that the utility can depend upon to
be available when they need it.
A 20% RES would reduce the amount of fuel (coal or natural gas)
required to generate electricity. However, since a gas turbine is
generally used to fill in the momentary drop-offs in wind or solar
generation, the fuel saved would be much less than 20%. Thus, there
would be almost no savings in total investment in dispatchable plants
and less than a proportional savings in fuel costs. Getting a realistic
estimate of the cost of wind energy requires including the cost of
backup or storage.
Since wind farms and solar arrays have low capacity factors (10-40%
for wind and 10-20% for solar), it would take 2.25 to 9 units of wind
capacity to replace on unit of nuclear capacity and 4.5 to 9 units of
solar capacity to replace on unit of nuclear capacity. For example, a
solar array in New Jersey with a capacity factor of 10% would have to
have nine times the capacity of a nuclear reactor to produce the same
amount of electricity. A wind farm with a capacity factor of 30% would
have to have three times the capacity of the nuclear reactor to produce
the same amount of electricity. Thus, a 1,000 MW nuclear reactor
produces as much electricity as 9,000 MW of solar cells in New Jersey
or 3,000 MW of wind farms in Pennsylvania.
Question 2. Do you agree that as it now stands, our country's
transmission infrastructure is woefully inadequate to achieve a 20% by
2021 RPS requirement?
Answer. Yes. The vast majority of the current transmission grid was
built to transfer energy from the generators owned by a utility to its
customers. Some transmission was built to interconnect utilities. Since
restructuring began in 1998, there has been little investment in
transmission in restructured areas. Thus, the grid is not designed to
get renewable energy from the best wind and solar sites to population
centers. Massive investment in transmission would be needed to
implement a 20% RES.
Question 3. What are the estimated infrastructure costs to meet the
legislation's requirement? How realistic is it to get the necessary
transmission in place in time to meet the hard and fast deadlines of
the national mandate? Should Congress build some flexibility into the
program if inadequate transmission prevents compliance?
Answer. The National Academy of Sciences ``America's Energy
Future'' study deals with this question and should be available within
two months. I have seen estimated costs for a modern grid that could
accommodate renewables that exceed $200 billion. A doctoral
dissertation done a few years ago at Carnegie Mellon documented the
difficulties in siting new transmission lines. Particularly in densely
populated areas, there are formidable difficulties since few people
want a transmission line on their property or close by. In the 2005 or
2007 energy legislation, Congress authorized the Secretary of Energy to
designate national transmission corridors. I do not think that this
designation has been terribly helpful in overcoming the objections to
siting new transmission lines. There is considerable doubt that new
lines can be sited to transmit the electricity to population centers.
For example, Texas' requirement for renewables resulted in large
investments in wind farms in the west, but it took some years to build
the transmission to bring the electricity to market.
Question 4. Given the different goals and definitions of renewable
energy in the various state renewable energy standard programs, how
does the majority staff draft ensure consistency and coordination of
the state and federal programs?
Answer. There is a vast, inconsistent array of definitions of
renewable power among the states. For example, Pennsylvania includes
electricity generated from waste coal piles. Some states have a solar
set aside. Some states include methane from landfills. There is no
uniformity across states; I don't see a possibility for coordination. A
federal standard could set a minimum requirement that states could be
free to supplement.
My understanding is that the usual justification given for federal
legislation overriding what states consider their prerogative is
interstate commerce. However, Texas has essentially isolated its
electricity grid from much of the nation and so there is little
interstate commerce for electricity between Texas and the rest of the
nation.
Question 5. Do you agree that any federal RPS program must account
for the regional variations in the supply of renewable resources?
Answer. Renewable resources are not uniformly spread across the
USA. The Northern Great Plains have the best wind resources, the desert
Southwest has the best solar resources and the West has the best
geothermal. The West generally has poor biomass resources because of
low rainfall. A national RES would be punitively expensive if it
doesn't allow a great deal of flexibility in how to meet the standard.
I favor a carbon portfolio standard that would focus on the most
important issue for electricity generation. I would include efficiency
in that standard to give a region such as the Southeast with poor wind
and solar resources an inexpensive way to comply. For example,
California and New York State both use 40% less electricity per capita
than the national average. They have achieved this efficiency with
major expenditures and programs. If the Southeast could lower its
electricity use by 40%, they would achieve more than twice the carbon-
dioxide emissions reduction of a 20% RES.
Question 6. Instead of a Renewable Portfolio Standard, you advocate
the creation of a Carbon Portfolio Standard (CPS). How would something
like that work? How would you treat energy efficiency under a CPS?
Answer. I do favor a carbon portfolio standard. California has
already created a model for this. They allow no more than a specified
amount of carbon-dioxide to be emitted per megawatt-hour of generation.
The standard can be met by renewables, by nuclear, or by fossil fuels
with CCS. I would also allow the standard to be met by increased energy
efficiency. That could be done by setting a standard for carbon-dioxide
emissions due to electricity use per capita. Assume that the CPS called
for a reduction of 40% of carbon-dioxide emissions. For a state that
uses 30,000 kWh of electricity per capita per year, they could meet the
standard by lowering carbon-dioxide in electricity generation or by
lowering electricity use. For example, the state could lower
electricity use by 20% to 24,000 kWh per capita and lower carbon-
dioxide emissions per kWh by 20% in order to meet the standard.
Question 7. How are the states doing in implementing their own RPS
requirements? I understand that Massachusetts is behind, in part
because the proposed wind farm off Cape Cod has yet to be built--and
it's been under review for the past several years.
Are the long-distance transmission lines needed to deliver the
power, to meet the state requirements, being built?
Answer. Massachusetts has been unable to meet its RPS until this
year. Utilities were forced to buy renewable energy credits for about 6
cents per kWh for their shortfall. States such as California and New
York have set extremely ambitious RPS and it is far from certain that
they will be able to attain them. Difficulties in siting wind farms and
transmission lines have slowed the introduction of renewables.
There has been little investment in transmission in the deregulated
states.
Question 8. Can you explain the problems with integrating
intermittent renewable resources into the grid? It was just last
February that the Texas grid was forced to shed load when the wind
stopped blowing, dropping from 2000 MW to 350 MW just as demand peaked.
What kind of investments in transmission and storage do we need to make
to ensure the reliability of renewable power?
Answer. Both wind and solar resources are variable, meaning that
the generation varies from minute to minute. To keep power quality
high, investments are needed to fill in the generation gaps. For very
short term variation, batteries, flywheels, and capacitors can be used.
For variation that occurs over hours, generally gas turbines (or
hydropower where available) are used. Prediction of wind and clouds has
gotten better, but are far from perfect. There are recent experiences
in Texas and Hawaii when unpredicted drop-offs in wind resulted in near
blackouts because alternative generation could not be ramped up fast
enough.
The variation in wind and solar can be dampened by hooking in wind
farms and solar arrays from distant sites. However, this is only a
partial solution; a study done by GE for Texas found five days during
April when there was essentially no wind energy available in Texas.
To supply reliable, high quality power, the wind and solar
generation must be backed up with a variety of quick acting and longer
lasting instruments. For example, batteries, flywheels, and capacitors
can be used to correct minute to minute variable while hydro or gas
turned can be used to fill in generation shortfalls that are hours in
duration.
I cannot estimate the required investment in transmission, apart
from the estimate of more than $200 billion. The investment to overcome
the minute to minute variability is about 1 cent per kWh.
Question 9. In your opinion, should Congress be trying to pick
technology ``winners and losers'' with a national RPS? How can we best
accommodate future technological innovation?
Answer. No. An important lesson from the 1970s is that government
needs to decide which technologies to spend R&D money on, but should
not pick which technologies should be implemented. Engineers and
entrepreneurs should make that decision. I am a technological optimist
and believe that better technologies will emerge over the next decade
or so. Our research monies should support the development of these new
technologies, but they should have to compete with other technologies
for implementation.
Question 10. Proponents of a national RPS insist the Southeast can
meet the mandate through the use of biomass. Do you agree? Is this the
best use for biomass, with its land limitations, or is this resource
better used in transportation fuels?
Answer. The Southeast has abundant biomass resources. There might
be sufficient biomass to meet a 20% RPS. However, in a world with
stringent greenhouse gas emissions constraints, we know how to produce
electricity with little or no carbon emissions through hydro, nuclear,
wind, solar, and fossil fuels with CCS. Producing liquid fuels for
cars, aircraft, and ships is a much more difficult problem. Liquid
fuels without carbon-dioxide emissions can be produced from biomass. In
a carbon constrained world, we would want to devote biomass to
producing liquid fuels, not to generating electricity.
Response of Lester B. Lave to Question From Senator Landrieu
Question 1. I know that we can achieve efficiency gains in both the
interstate transmission of electricity as well as the retail
distribution of electricity. In Sen. Bingaman's draft language that has
been circulated, it only allows for savings from the retail
distribution of electricity. Don't you think there are huge efficiency
gains to be made through efficiency upgrades to our transmission
backbone? Shouldn't that also be included in any efficiency portion of
a RES?
Answer. The usual estimate is that about 2% of electricity is lost
in transmission and 8% in distribution. However, current transmission
lines are relatively short. If we attempted to transmit power over long
distances with today's relatively low voltage alternating current
lines, transmission losses would be much greater. If we need to
construct transmission to take wind from North Dakota to Florida, the
cheapest, most efficient way to transmit electricity over long
distances is with high voltage direct current lines. Building an
infrastructure with HVDC lines would be expensive and time consuming
because of siting objections. There would be substantial electricity
lost even for these lines due to the distance.
Responses of Lester B. Lave to Questions From Senator Sessions
Question 1. What are we trying to achieve through a Renewable
Electricity Standard (RES)? What are the goals? By focusing solely on
renewables, are we limiting our options to achieve an adequate supply
of clean, low-carbon, reliable and affordable electricity?
Answer. People have different goals for an RES. The national
interest would be served by lowering carbon-dioxide emissions,
increasing environmental quality more generally, increasing
sustainability and energy security, and by keeping electricity prices
low enough not to have inordinate economic and personal penalties. Some
people want an RES because they want to sell equipment that they make.
Others support an RPS because they think they already know which
technology is best at attaining these goals. I agree with the social
objectives and think that equipment makers have the right to try to
persuade people to buy their products. I do not see how someone could
know what is the best technology to attain the social objectives at
such an early stage of development of the technologies.
Rather than focusing on a RES, I favor a carbon portfolio standard
that includes energy efficiency. In my judgment, this approach would
allow us to attain our social goals at least cost and with the least
disruption.
Question 2. If the main concern surrounding RES is to have clean
energy then we should consider nuclear power. Nuclear power is produced
in the United States, it has zero carbon dioxide emissions, and it does
not put stress on agriculture products or the timber industry. Why has
this source not been considered in the RES discussion?
Answer. Senator, I agree that all sources of low carbon energy
should be considered and allowed to compete. I do not know why nuclear
has not been considered.
Question 3. Why do you include energy sources that may yield some
benefit in the future and do not have any short term benefits, but
continue to exclude nuclear power that has both short term and long
term benefits?
Answer. Senator, respectfully, I would like nuclear to be able to
compete to provide low carbon power to the nation.
Question 4. The US consumes approximately 1000 gigawatts of
electricity every year. The RES legislation would require approximately
200-220 gigawatts to come from renewable energy sources by 2020. What
percentage of the renewable energy mandate will be supplied by wind and
why does wind have a larger potential than other renewable sources such
as hydro or nuclear?
Answer. Sir, the US electricity industry produced 4.1 million
gigawatt-hours in 2006. A federal RPS would require up to 0.8 million
gigawatt-hours from renewables, if there were no efficiency gains. At
this time, wind turbines in good wind locations are the least expensive
way to generate a significant amount of additional renewable
electricity. During the 20th century, we built a tremendous amount of
hydroelectric capacity by damming major rivers. Few good locations
remain to be exploited. Flooding large amounts of land behind high dams
has major environmental impacts, as well as impeding fish migration. At
this time, the nation is not building new major hydroelectric projects,
but rather is breaching some dams. There are some ``run of the river''
hydro that could be developed and some ``low-head'' hydro on small
rivers and streams, but the total amount of electricity that could be
generated is relatively small. Geothermal generation, where there are
good resources, can compete with wind. In some locations, solar thermal
is almost competitive. Solar photovoltaic is much more expensive than
current generation. Nuclear has vast potential for power generation,
but the cost of power from new nuclear reactors is uncertain until we
construct new plants.
Thus, wind turbines in good locations offer the lowest cost
electricity; there are much greater wind resources than other
renewables, except solar. Thus, major develop of renewable resources
has focused on wind.
Question 5. In your opinion, how will the Southeast states meet
their mandate requirements since wind is not a significant energy
source in this region?
Answer. The Southeast could meet an RES in three ways. It could use
biomass in the form of trees, it could import wind energy from good
locations, or it could buy renewable energy credits from areas that can
more than meet the RES. Biomass is probably the cheapest alternative,
unless the biomass is wanted for producing transportation fuels.
Building long transmission lines will greatly increase the cost of
delivered power. For example, we estimated that a 1,000 mile
transmission line would double the delivered cost of power. Buying
renewable energy credits would be limited by the ability of areas with
good wind resources to absorb wind energy. For example, North Dakota
has perhaps the best wind resources in the nation. However, there is
very limited ability to absorb large amounts of wind generated
electricity locally. As a practical matter, if more than 15-20% of
electricity is provided by wind, there would have to be major
investment to buffer the variability of wind and to ramp up quickly
when wind speeds dropped.
There is a fourth alternative: Develop wind and solar generation
where the resource is extremely limited. This would result in very
costly power.
Question 6. How will a RES affect the price of electricity in
Southeast states?
Answer. If biomass is available to meet the RES, electricity
generation costs might rise by perhaps 25-50%. If long transmission
lines are built, the wholesale price of electricity in the Southeast is
likely to double or more. If they are able to buy renewable energy
credits, electricity prices will rise by 3 cents per kWh.
Responses of Lester B. Lave to Questions From Senator Corker
Question 1. I was interested in the testimony you provided
regarding biomass and the Renewable Fuel Standard. Could you discuss
why you believe biomass is best suited for transportation fuel and not
for an RES? Do you have any sense of what the available biomass
resources are in the Southeast and approximately how much of those
resources would be used for the RFS? If there are not enough biomass
resources in the Southeast to meet the demands of both the RFS and RES,
would an RES essentially force the Southeast to direct this renewable
resource to the less efficient ``market'' or would the available
biomass be used for the RFS, forcing the Southeast to comply with an
RES through the purchase of credits or alternative compliance payments?
Answer. Biomass could be used either for electricity generation or
production of liquid transportation fuels. Since there are a variety of
technologies for producing electricity with little or no carbon-dioxide
emissions, biomass would not be terribly important for this use. In
contrast, ethanol is the best source of liquid fuel for transportation
without net carbon-dioxide emissions, assuming the ethanol comes from
biomass, not corn. Thus, if large reductions in carbon-dioxide
emissions are required, biomass would be used to produce ethanol, not
electricity.
If the Southeast were required to satisfy a 20% RPS and biomass was
the cheapest way of doing it, biomass would be diverted from a higher
use.
The National Academy of Sciences ``America's Energy Future'' report
will present the best estimates of biomass resources. Until then, a
study from many of the National Labs estimates that 500-1,000 million
tons of biomass could be available for transformation into electricity
or liquid fuels. The study gives details on the state by state biomass
availability.
Question 2. A federal RPS would dramatically increase wood demand
and, as a consequence, increase prices on the forest products industry
which relies upon affordable and reliable wood fiber. During these
difficult economic times, such price increases would threaten good jobs
in this industry, particularly in rural America. Is it true that a
federal RES, as currently constructed, would drive up wood fiber costs
and directly lead to job loss in the forest products industry?
Answer. I am not an expert on the variety of jobs in the forest
products industry. If the trees are being cut for fuel to generate
electricity, there would be fewer jobs than if the trees are converted
into liquid fuels. I conjecture that large scale tree farming with
conversion of the biomass into liquid fuels would generate many jobs
and substantial income in the Southeast.
Responses of Lester B. Lave to Questions From Senator Mark Udall
Question 1. Each region of the U.S. is blessed with excellent
renewable resources. If wind power potential is not very good in the
southeastern U.S., does that mean that utilities in that region of the
country will be unable to provide their customers with electricity
generated from renewable resources under a RES?
Answer. The draft legislation allows a state to meet the federal
RPS by buying renewable energy from another state or by buying
renewable energy credits. If states in the Southeast found it too
expensive to generate renewable electricity within their state, they
could meet the requirement in the other two ways. The likely
implication is that these states would have higher electricity prices
than states with good wind resources.
I would like to see greater flexibility in the legislation. I would
tighten the definition of efficiency and remove, or at least lessen the
cap. I would include all low or no-carbon generation in the definition.
Of course, I would then raise the standard that each state would have
to attain, given this more flexible definition.
My point is that society needs to be clear on the goals that the
legislation is seeking to achieve. In my judgment, reducing carbon-
dioxide emissions and preserving reasonable low costs are the two most
important goals. We have sufficient coal and uranium so that
sustainability is not a first order concern. Energy security is not
currently a first order concern since only 2% of electricity is
generation from petroleum and we import substantial amounts of natural
gas only from Canada. Congress and EPA should monitor environmental
quality carefully and enact whatever legislation and standards are
needed to ensure high environmental quality, particularly if we are
mining and burning greater quantities of coal. For these reasons, I
urge you to focus this legislation on the goals of lowering carbon
dioxide emissions at a reasonable cost.
Question 2. During the Bush Administration, the Energy Information
Administration analyzed several different national RES legislative
proposals. In each case, EIA determined that biomass would receive the
most RES credits of any renewable technology eligible to receive
credits. Please identify which regions of the country have the greatest
biomass potential.
Answer. The National Academy of Sciences ``America's Energy
Future'' studies will present good estimates of biomass potential.
Until the report is available, there is a report on biomass potential
by a consortium of National labs.
______
Responses of Don Furman to Questions From Senator Bingaman
Question 1. In your experience, are the multiple state standards
able to produce a credit trading market that can generate a reasonably
consistent national value for renewables credits?
Answer. No. While there is a loose market of traded renewable
credits, it is illiquid and highly inefficient. Each state defines
renewable energy differently. In addition, certain states prohibit the
use of RECs associated with renewable energy generated in other states
to be used for compliance purposes, or place a different value on out-
of-state RECs and in-state RECs. A consistent definition of eligible
renewable energy and a nationwide trading platform--both of which would
be achieved with the enactment of your RPS bill--is needed if we are
going to be able to reap the full benefits of REC trading.
Question 2. In our proposal we allow states implement their own
standards that are stronger than the federal standard and to regulate
what their utilities can do as far as selling excess federal credits,
while not compelling them either to allow the sale or to disallow it.
Does this, in your view, result in more renewables built and generated?
Answer. Yes. The Bingaman RPS proposal would establish a national
renewable energy floor but allow states to exceed that floor if they so
choose. This will lead to greater amounts of renewable energy than if
the Bingaman proposal preempted state opportunities to promote
renewable energy. In addition, if a state that chooses to require its
utilities to exceed the national requirement also requires those
utilities to ``retire'' RECs that the utility won't need to comply with
the national RPS instead of selling those credits to other utilities,
this will lead to a greater amount of renewable generation because
additional RECs will be required for national RPS compliance.
Responses of Don Furman to Questions From Senator Murkowski
Question 1. How much back up power from conventional power plants
is needed to meet a 20% RPS requirement by 2021? At what cost?
Answer. Because the issuance of renewable energy credits under the
Bingaman RPS proposal is dependent on the generation of renewable
electricity, no back up power from non-renewable power plants will be
necessary to meet the RPS requirement.
Some opponents of renewable energy argue that, for every
installation of wind or solar power, utilities will need to build an
equal amount of thermal power plants (generally fueled with natural
gas) to provide power when the wind isn't blowing or the sun isn't
shining. This is a dramatic overstatement. We will need to build some
additional thermal generation, as well as transmission, in order to
accommodate a higher percentage of intermittent generation. However,
the additional thermal generation required to support a given amount of
wind or solar is a small fraction. This issue becomes less significant
depending on the size of a particular utility control area. The broader
the control area, the easier it is for utilities to manage plant
outages without additional generating capacity. Equally important, with
or without an RPS, utilities will need to build and acquire reserve
generation capacity to address situations where conventional and non-
conventional generation facilities are temporarily unavailable.
Question 2. Do you agree that as it now stands, our country's
transmission infrastructure is woefully inadequate to achieve a 20% by
2021 RPS requirement?
Answer. Our country's transmission structure is inadequate with or
without the enactment of a national RPS. NERC has on numerous occasions
noted that substantial additions to transmission capacity are necessary
if we are going to maintain the reliability of the grid. The additional
investments needed to restore reliability will also allow utilities to
manage intermittent generation, such as wind and solar, at much lower
costs. Also, one of the benefits of an expanded grid is the ability to
access some of the best renewable energy resources which are often
located in remote regions of the country, some distance from load.
Enhancing our transmission infrastructure would help lower the cost of
compliance of a national RPS.
Question 3. What are the estimated infrastructure costs to meet the
legislation's requirement? How realistic is it to get the necessary
transmission in place in time to meet the hard and fast deadlines of
the national mandate? Should Congress build some flexibility into the
program if inadequate transmission prevents compliance?
Answer. It is not possible to provide an estimate of the investment
in transmission infrastructure that would be necessary to meet the RPS'
requirement because there is no particular level of transmission
infrastructure that would be required to meet the RPS. The same
response applies to the request for the time deadline for having the
transmission infrastructure in place. Additional transmission
infrastructure will help reduce the compliance costs of the RPS but
utilities will not necessarily be left without compliance options if
transmission is not built. The Bingaman proposal already provides
flexibility to utilities by enabling them to make an alternative
compliance payment if they aren't able to generate/acquire renewable
energy or renewable energy credits that are more cost effective.
Question 4. Given the different goals and definitions of renewable
energy in the various state renewable energy standard programs, how
does the majority staff draft ensure consistency and coordination of
the state and federal programs?
Answer. The Bingaman proposal would require the Secretary of Energy
to, the maximum extent practicable, facilitate coordination between the
Federal RPS program and state RPS programs. The lack of consistency
between state RPS programs is one of the reasons we need a Federal RPS
to ensure a consistent national approach but would also allow states to
impose additional requirements on their utilities.
Question 5. Do you agree that any federal RPS program must account
for the regional variations in the supply of renewable resources?
Answer. As long as the definition of ``renewable energy'' is as
broad as it is in Senator Bingaman's RPS proposal, each region of the
country would be able to comply with a national RPS. Some opponents of
a national RPS have attempted to portray the Southeastern United States
as being disadvantaged because wind resources in the Southeast are not
optimal. Nothing could be further from the truth. As the Energy
Information Administration has repeatedly found, biomass, not wind,
would generate the most renewable energy credits under a RPS and the
Southeast has substantial biomass resources and also has a reasonable
amount of solar power potential.
Question 6. Wind energy had a record year least year, installing
over 8,300 megawatts of new generating capacity on line and bringing
domestic wind capacity to 25,000 megawatts. Given the various federal
incentives we provide for the wind industry, from R&D funding, the
Production Tax Credit, the CREBS program, and the new loan guarantee
program created in the stimulus package, to name just a few, why does
the wind industry need a federal Renewable Portfolio Standard?
Answer. To date, the Federal government has chosen to incent
renewable electricity production primarily through the tax code.
Although the renewable production tax credit (PTC) has been successful
it has also produced a great amount of uncertainty because the PTC has
never been extended on a long-term basis. As a result, U.S. investment
in manufacturing capability has fallen far behind the rest of the
world, and at least half the equipment installed is manufactured
overseas. The recent collapse of the tax equity market--which many
renewable energy developers had utilized to monetize the PTC--has added
even more uncertainty. Renewable energy developers need a more stable
public policy approach. The RPS provides more long-term certainty by
establishing a market for renewable energy over a reasonable period of
time. It will also provide the certainty to cause investors to build
manufacturing facilities in the U.S., employing Americans and saving
consumers money.
Question 7a. You highlight last year's Department of Energy report
that determined wind could produce up to 20% of the nation's power by
2030. The DOE report found that in order to reach a 20% level, we would
need 300,000 megawatts of wind generation--an 1100% increase in wind
power capacity. How much of this would have to be off-shore wind since,
as you know, we still don't have any off-shore wind in this country?
Answer. The continental U.S. has more than enough potential to meet
the 300 GW target for wind energy which the DOE has estimated to be
feasible. Off-shore wind could play a role, but it is not necessary.
Question 7b. Is the lack of adequate transmission another
impediment? How much transmission would we need to accommodate a 20%
level of wind power?
Answer. The lack of sufficient transmission capacity was one of the
barriers identified in the DOE report. According to DOE, $60 billion in
transmission will be needed to satisfy the 20% target. If this
investment is made, many regions of the country would gain access to
less expensive renewable and non-renewable generation. It is also
important to point out that much of the $60 billion investment needs to
be made anyway, to increase reliability and reduce congestion. Both
transmission congestion and reliability concerns cost the economy
billions of dollars per year.
Question 7c. A new study undertaken by MISO, PJM, SPP, the SERC
Reliability Region, and TVA found that in order to get 20% of our
nation's electricity by 2024, we would need to upgrade our transmission
system at a cost of $100 billion, and the wind turbines needed to
generate that power would cost almost $720 billion. Do you agree with
this assessment? If not, why not?
Answer. I haven't yet reviewed the entire study. However, I
understand the study concluded that this investment would save
consumers in the Eastern U.S. approximately $12 billion per year. As I
noted earlier, investments in transmission infrastructure offer
consumers significant benefits that need to be taken into account when
assessment whether such investments should be made.
Question 8. You testified that a national RPS will provide a direct
signal to the market place that will drive renewable energy development
and eventually obviate the need for the Production Tax Credit. At what
point do you see that happening? If we adopt a national Renewable
Portfolio Standard, do we really need to continue the PTC? Shouldn't it
be one or the other?
Answer. If a national RPS is enacted and it is robust enough to
encourage investment in new renewable energy generating capacity, I
believe it would be appropriate to phase-out the PTC. Given that each
national RPS that has been proposed contains a ramp-up mechanism, it
will be important to ensure that the national renewable target has
ramped-up sufficiently to incent enough demand in renewable energy to
negate further need for the PTC.
Question 9. I understand from your testimony that you do not
support the inclusion of energy efficiency as a potential resource to
meet even a small portion of the RPS standard. Rather than set a
completely separate energy efficiency standard, as you propose, isn't
there a way to make energy efficiency work in the context of an RPS?
Answer. It is very easy to determine when a kwh of renewable energy
has been generated. However, it is much more difficult to calculate
when a specific action has reduced a kwh of energy demand. That is why,
although I believe energy efficiency should be strongly encouraged and
should be our nation's highest priority, a portfolio standard approach
is not the best public policy approach for achieving energy efficiency.
I am concerned that the energy efficiency provisions contained in the
Bingaman bill could reward credits that don't actually achieve specific
energy savings.
Question 10. As drafted, Chairman Bingaman's draft provides for
some exemptions such as those utilities with retail sales of less than
4 million megawatt-hours and taking hydropower out of the baseline
calculation. What don't you support these exemptions? With regard to
hydropower, are you actually advocating the displacement of this clean,
renewable, base load generation?
I don't support or oppose these exemptions. I simply noted in my
testimony that, if these exemptions are included, it is important that
the RPS standard be set higher to take into account the reductions in
renewable energy generation due to these exemptions.
Question 11. In your written testimony, you contend that our
electric generating sector has become ``dangerously reliant'' on
natural gas and that domestic supply is ``unlikely'' to keep pace with
demand. But the facts seem to tell another story. We used natural gas
to generate just over 20% of our electricity last year. Roughly 85% of
that gas was produced here in the United States, and about 98% was
produced in North America.
It also appears that we have more than enough natural gas to
facilitate the generation you mentioned. EIA recently announced the
largest-ever increase in its estimate of domestic reserves. Looking
forward, EIA has projected that consumption will increase by an average
of 0.2% per year through 2030--with imports accounting for just 3% of
total consumption that year. And, a significant boost in supply is
expected to come from my home state, Alaska, which is making progress
on a natural gas pipeline that will transport 4 billion cubic feet per
day.
Can you explain then, why you see natural gas as an unacceptable
resource for electric generation?
Answer. I don't view natural gas as an unacceptable resource for
electric generation. In fact, Iberdrola Renewables owns several gas-
fired electric generation facilities. I also believe that natural gas
will be a critical component of our energy supply going forward. I am
concerned, however, with our growing reliance on natural gas-fired
capacity and with a return to the trend of the 1990s where virtually
all new electric generation was natural gas-fired.
The demand for natural gas in the electric generation sector has
increased by approximately 62 percent over the last 14 years. Outside
of wind, almost all of the new generating capacity built over the last
several years is powered by natural gas and that trend is expected to
continue into the future--especially if Congress restricts greenhouse
gas emissions without adopting additional policies aimed at increasing
renewable generation.
It may very well be that new domestic sources of natural gas,
including those located in Alaska will help limit natural gas imports.
However, we also could experience a significant increase in the demand
for gas in the transportation, electric generation, industrial,
agriculture and home heating sectors. It is important to remember that
EIA's forecast does not assume the imposition of restrictions on
greenhouse gas emissions.
Finally, I think it is important to note that T. Boone Pickens
believes we need to substantially reduce the use of natural gas in the
electric generation sector in order to enable the increased use of gas
for transportation in order to reduce our reliance on foreign imports
of oil.
Response of Don Furman to Question From Senator Landrieu
Question 1. I know that we can achieve efficiency gains in both the
interstate transmission of electricity as well as the retail
distribution of electricity. In Sen. Bingaman's draft language that has
been circulated, it only allows for savings from the retail
distribution of electricity. Don't you think there are huge efficiency
gains to be made through efficiency upgrades to our transmission
backbone? Shouldn't that also be included in any efficiency portion of
a RES?
Answer. We can and should make improvements to the transmission
grid that result in fewer losses associated with the transportation of
electricity. The Federal government should certainly encourage these
improvements. The Bingaman RPS proposal rewards efficiency in the
distribution of electricity but not necessarily the interstate
transmission of electricity. If there is going to be an energy
efficiency standard, it might be appropriate to include transmission
efficiency. However, as I noted in my testimony, I don't support the
inclusion of an efficiency component in a national RPS because it is
too difficult to actually measure energy savings attributable to
specific actions.
Responses of Don Furman to Questions From Senator Sessions
Question 1. What are we trying to achieve through a Renewable
Electricity Standard (RES)? What are the goals? By focusing solely on
renewables, are we limiting our options to achieve an adequate supply
of clean, low-carbon, reliable and affordable electricity?
Answer. The national RPS should be designed to encourage the
development of a domestic renewable energy industry. This will enable
the renewable energy industry to make a major contribution to our
national economy, energy security and our goals of reducing greenhouse
gas emissions. However, other policies will also be necessary to reduce
greenhouse gas emissions. We often hear from opponents of a national
RPS that nuclear power should be eligible for credits. However, it is
highly unlikely, given how long it will be before we see the next
generation of nuclear power plants placed in service, that new nuclear
power facilities can be a major contributor to our generation portfolio
in the near term. That is why we aren't seeing the nuclear industry
push for the inclusion of nuclear in a RPS.
Question 2. If the main concern surrounding RES is to have clean
energy then we should consider nuclear power. Nuclear power is produced
in the United States, it has zero carbon dioxide emissions, and it does
not put stress on agriculture products or the timber industry. Why has
this source not been considered in the RES discussion?
Answer. See response to Question 1.
Question 3. Why do you include energy sources that may yield some
benefit in the future and do not have any short term benefits, but
continue to exclude nuclear power that has both short term and long
term benefits?
Answer. See response to Question 1.
Question 4. The US consumes approximately 1000 gigawatts of
electricity every year. The RES legislation would require approximately
200-220 gigawatts to come from renewable energy sources by 2020. What
percentage of the renewable energy mandate will be supplied by wind and
why does wind have a larger potential than other renewable sources such
as hydro or nuclear?
Answer. The Energy Information Administration, in analyzing
previous RPS proposals, has consistently concluded that biomass will
provide more renewable energy generation than wind in order to meet a
national RPS requirement. Incremental hydropower capacity would be
eligible to be used for RPS compliance but most experts don't
anticipate a significant amount of incremental hydropower potential.
Question 5. In your opinion, how will the Southeast states meet
their mandate requirements since wind is not a significant energy
source in this region?
Answer. The Energy Information Administration has determined that
utilities in the Southeastern U.S. would have access to significant
amounts of biomass energy as well as the ability to import wind power
generated in nearby states in order to meet a national RPS requirement.
Question 6. How will a RES affect the price of electricity in
Southeast states?
Answer. According to the Union of Concerned Scientists, consumers
in the southeast will experience a reduction in their energy bills of
$94 billion if Congress adopts Congressman Markey's 25% by 2025
national RPS. The reason for this reduction is that a national RPS will
reduce the demand for natural gas for electric generation which will
reduce both electric generation prices and the price of natural gas
used for home heating and cooking.
Responses of Don Furman to Questions From Senator Mark Udall
Question 1. Each region of the U.S. is blessed with excellent
renewable resources. If wind power potential is not very good in the
southeastern U.S., does that mean that utilities in that region of the
country will be unable to provide their customers with electricity
generated from renewable resources under a RES?
Answer. The Energy Information Administration has determined that
utilities in the Southeastern U.S. would have access to significant
amounts of biomass energy as well as the ability to import wind power
generated in nearby states in order to meet a national RPS requirement.
Question 2. During the Bush Administration, the Energy Information
Administration analyzed several different national RES legislative
proposals. In each case, EIA determined that biomass would receive the
most RES credits of any renewable technology eligible to receive
credits. Please identify which regions of the country have the greatest
biomass potential.
Answer. The Southeast and the Midwest have the greatest biomass
potential and each region would benefit greatly if a national RPS is
enacted.
Question 3. If the U.S. were to generate up to 25% of its power
from renewable resources, how would this impact our country's reliance
on natural gas to generate electricity?
Answer. Every credible study that has analyzed the impact of a
national RPS has concluded that the RPS would significantly reduce the
demand for natural gas in the electric generation sector.
Question 4. If the country switches to plug-in hybrids to power our
automobiles and also adopts a 25% national RES, what would the impact
be on oil and gas imports over the next 25 years?
Answer. Oil imports would be dramatically reduced because plug-in
hybrids will require substantially less oil than conventional vehicles.
In addition, if a national RES is enacted, plug-in hybrid batteries
could very well be recharged with electricity generated with renewable
resources which would then reduce our nation's demand for natural gas.
The reduced demand for oil and gas should translate into significant
reductions in imports.
______
Responses of Scott P. Jones to Questions From Senator Murkowski
Question 1. How much back-up power from conventional power plants
is needed to meet a 20% percent RPS requirement by 2021? At what cost?
Question 2. Do you agree that as it now stands, our country's
transmission infrastructure is woefully inadequate to achieve a 20
percent RPS requirement by 2021?
Question 3. What are the estimated infrastructure costs to meet the
legislation's requirement? How realistic is it to get the necessary
transmission in place in time to meet the hard and fast deadlines of
the national mandate? Should Congress build some flexibility into the
program if inadequate transmission prevents compliance?
Question 4. Given the different goals and definitions of renewable
energy in the various state renewable energy standard programs, how
does the majority staff draft ensure consistency and coordination of
the state and federal programs?
Answer. Staff can ensure consistency and coordination of the state
and federal programs by incorporating existing programs, such as the
USDA Forest Service Forest Inventory and Analysis (FIA) program and
programs initiated and implemented by the Farm Bill.
Question 5. Do you agree that any federal RPS program must account
for the regional variations in the supply of renewable resources?
Answer. We would agree that any federal RPS program must account
for regional variations in sources and supplies of renewable energy
resources.
We believe that wood is necessary to meet a Renewable Electricity
Standard. In a mosaic of energy sources, where each region of the
country produces energy from its own, best indigenous resources, we
seek a level playing field for wood. This level field of play will
bring the same jobs and new local tax bases to forested regions as
other regions will potentially enjoy.
But, we have deep concern that, under developing renewable energy
markets, forestland may be disproportionately burdened by well-meaning
but functionally stifling regulation, relative to other renewable
energy sources and their land bases. Simple acknowledgements of the
impracticality of applying agricultural principles to forestry is a
small step in the right direction; for example, the seasonal-crop,
closed-loop approach to energy feedstocks just has no place in dealing
with a crop that can take decades to culture, i.e., trees.
The negative impacts of national energy policies could create harm
to all family forestlands in the U.S. Wood is a reliable feedstock,
without the seasonal fluctuations or serendipity of weather that
inhibit some other energy sources. And this resource (wood) is
available now.
Question 6. In your testimony, you state that ``forest practice
policies are better determined at the local level to account for
differences in local conditions and needs, rather than through
prescriptive, one-size-fits-all federal mandates.'' Doesn't the same
hold true for a national Renewable Portfolio Standard requirement where
states are in a better position to develop programs that account for
the differences in available resources?
Answer. The majority of our forests are owned by private forest
landowners. Therefore, we have many individuals and companies working
across this country to maintain healthy, working forests. In certain
regions, we have state policy to offer guidance but in the majority of
the country we have state developed and monitored ``best management
practices''. These voluntary guidelines assist landowners in the
management of their forests to have minimal impact on water quality and
various other aspects of the land.
Since we have variations of species composition, Boreal forests in
Alaska, spruce and fir in the Pacific Northwest, southern yellow pine
in the Southeast, ponderosa pine in the Southwest, and hardwoods in the
Appalachians and Northeast, we are presented with a variety of specific
needs that can only be addressed properly at the local level.
If and how this would apply to energy production in the United
States is unclear to us at this time. However, we do believe that each
region should be allowed to utilize the renewable resources that they
have in order to meet any renewable goals that might be set at the
state or national level.
Question 7. You note in your testimony that your members look
forward to participating in the new markets created by new national RPS
requirements, so could the RPS policy be a money-making proposition for
your members? How do you propose to balance forest sustainability
issues with the new market demands?
Answer. In short, yes, landowners do stand to benefit from the new
markets for woody biomass that will result from a national RES. That
being said, it is important to understand the basic economics of
managing and maintaining a stand of timber, as well as the relative
value of all of the products removed from the forest. In order to
receive an acceptable return on investment (ROI) from a timberland
investment, trees must be grown to their highest potential value. In
most cases, this means growing trees long enough to be able to sell the
timber for sawlogs and veneer. As part of this process, and in order to
maintain a healthy, productive forest, timber stands must be thinned of
poorer quality, less vigorous trees in order to free up the site
resources for the better quality trees. In order to perform these
thinning treatments, adequate markets must exist to be able to have an
economically viable timber harvest of this material. Woody biomass for
energy consumption, which will likely consist of smaller diameter
trees, limbs, and tops removed during these thinning operations
represent the lowest value product removed from the forest as well as
the lowest percentage of overall income per acre during any specific
harvest. It is highly unlikely the energy markets created by a National
RES will drive a landowner's harvest and management decisions. The
higher value sawlogs will still be a requirement to justify a
reasonable return on a timberland investment. As such, the same laws,
standards, and protections that currently apply to all timber harvests
across the nation and in all states will still provide the same level
of protection.
Otherwise: In January 1905, the New York Times headline read,
``TIMBER FAMINE NEAR, SAYS PRESIDENT ROOSEVELT''. The article said that
``` . . . this country is in peril of a timber famine . . . ' as
asserted by the President this afternoon in an address before the
American Forest Congress. In the course of his remarks the President
said: `If the present rate of forest destruction is allowed to
continue, a timber famine is obviously inevitable. Fire, wasteful and
destructive forms of lumbering, and legitimate use are together
destroying our forest resources far more rapidly than they are being
replaced . . . Unless the forests can be made ready to meet the vast
demands which . . . growth will inevitably bring, commercial disaster
is inevitable.''[1]
Here are the words straight from the Times. I think this forcefully
makes the case for sustainability. Remember, pulpwood was non-existent
when this quote was made, as Charles Herty (1867--1937) had not yet
invented the pulping process. Only when we planted trees and encouraged
markets did we end our brush with a timber famine. The destructive form
of lumbering, then, was a process that is still called ``high grading''
trees, today. Because at that time, only a high quality part of the
tree was considered valuable for lumber, and the rest of the tree was
left in the woods to rot or was burned. The point here is: markets
cured the ``timber famine''. Forest management for commodities did
that. New markets did not create sustainability problems; they cured
them.
Question 8. As you know, proponents of a national RPS point to
biomass as the sole renewable resource available to meet the 20 percent
by 2021 requirement. Do you believe that the Southeast has enough
biomass to meet a 20 percent requirement and still fulfill demand for
other wood products such as pulpwood and saw logs?
Answer. This is not an easy question to answer, but it is safe to
say that in the Southeast, 100 percent of the ``20 percent
requirement'' would not have to originate from forest biomass. It is
also safe to say that forests in the U.S. South are accumulating
significantly more woody biomass than is currently consumed annually
and have done so for decades; indicating excess availability of woody
biomass to meet new demand.
Some of the contemplated legislation has considered efficiency as a
possible contributor. There are also many other forms of biomass
available to help meet the standards such as mill residues and
byproducts, urban wood, nursery and right-of-way trimmings, agriculture
wastes, timber from salvage operations, storm debris, clean
construction waste, etc. There are, although in much smaller
quantities, other available renewable resources such as some possible
solar opportunity in Florida, a small amount of geothermal in Louisiana
and Arkansas, and potentially, with eased political pressures, some
untapped hydros. All in all, biomass will still make up the dominant
proportion of renewable energy in the Southeast, but the availability
of these other options must be assessed to accurately reflect the
percent of renewable energy that will ultimately come from biomass.
In the United States as a whole, similar to southeastern
statistics, timber growth has exceeded the harvests since 1952.
Growing-stock volume on U.S. timberland has increased 39 percent
between 1953 and 2002. That is, the nation's forest inventory accrued
more volume than it lost by mortality and harvest by over one-third
[2].
You may hear that adding a new RES market to existing markets will
create an unsustainable resource. It is simply not true. We do not have
enough markets for the wood that we are growing, as shown in the USDA
Forest Service's Resource Planning Act (RPA) data collected by the
Forest Inventory Analysis program. The 2002 data showed that across all
species in the United States, we were growing 34 percent more volume
then we removed [3]. Now, with the reduction of forest products
manufacturing, we have seen an increase in the amount of growth versus
removal. The 2007 RPA data shows a 41 percent volume grown over removal
[4]. The impact of the reduction of our forest products manufacturing
is having a clear effect on the amount of wood being grown and the
threat to the health of our forests and private forest landowners is
eminent. We believe arguments to the contrary are likely disingenuous
and perhaps more motivated by competition for raw materials, and/or
feedstock preferences, and/or tax avoidance than resource
sustainability. The forest resource is sustainable and this question
has been asked and answered before. But, the willingness of forest
landowners to maintain forestland as forestland has had too little
attention. Federal forest policy must address the conundrum of what
would motivate a forest landowner to continue to hold that investment
when it is threatened by new and evolving forces; whether it is
opportunities for better financial returns for their families,
shrinking market access, or investment-dampening legislation and
regulation.
Question 9. What are the transportation expenses associated with
woody biomass? I understand that because transporting biomass is
expensive, it is more likely to be used only near existing coal-fired
power plants or in plants especially built for biomass. Is that
correct?
Answer. Woody biomass is expensive to transport long distances.
This is typically a function of the density of the biomass material and
the moisture. Biomass (woodchips, needles, bark, sawdust, etc.) is
usually loosely packed in a truck, therefore the amount of energy being
transported per unit measure (ton, cubic foot, etc.) is much less than
other fuels used to produce electricity. With regard to moisture, for
every percent of moisture, it will take some of the Btu value of the
biomass to evaporate that water, thus ``stripping'' some Btus away from
the production of energy. Thus, the dryer and denser the material can
be, typically, the further the material can be economically hauled. Due
to this, it is advantageous to locate the consuming facility as close
to the biomass source as possible. This is typically assumed to be
within 50 to 80 miles of the consuming facility.
Question 10. Professor Lave notes that biomass is hampered by land
limitations and that biomass is better used for transportation fuels.
You've noted that forestlands are being converted to other uses at a
rapid rate. Do you agree that biomass is better used for transportation
fuels instead of electricity production?
Answer. Where available and economically feasible, all raw
materials can and should be used as sources for energy production,
whatever the form of energy produced. Some feedstocks may be more
economical regionally, and the market will determine that. But, the
markets will make those determinations; hopefully with some initial
stimulus to jumpstart these new alternative energy production
opportunities.
Question 11. You noted that the definition of ``renewable biomass''
included in the 2007 Energy Independence and Security Act has excluded
America's natural private forest landowners from ``participation in the
initiative to establish a renewable fuels industry.'' How would you
change the definition of biomass in the 2007 Renewable Fuels Standard
to ensure your members can participate in these new markets and to slow
the conversation of natural forest on private lands to housing tracts?
Do you think southeast states would be able to meet their mandated
requirements if they are not allowed to use woody biomass to generate
electricity?
Answer. Healthy working forests, either naturally or artificially
regenerated, are dependent on viable, sound markets in which to sell
timber. Without markets, the economic justification of keeping land in
a forested state is lessened or completely disappears. Developing as
broad a definition as possible, with the inclusion of the whole tree
and all tree parts regardless of their natural or artificial origin,
would be the most complete way of assuring that landowners have the
optimal opportunity to continue to manage their forests as forests and
does not heap disincentives on an endeavor that is currently burdened
by external pressures to convert from forestland to other land uses.
The willingness of forest landowners to maintain forestland as
forestland has had too little attention. Federal forest policy must
address the conundrum of what would motivate a forest landowner to
continue to hold that investment when it is threatened by new and
evolving forces; whether it is opportunities for better financial
returns for their families, shrinking market access, or investment-
dampening legislation and regulation.
Urbanization will have the ``most direct, immediate and permanent''
effects on southern forests of all forces of change [1]. The incentives
for forest landowners to convert forestland investments to residential
and commercial real estate are led by population growth. U.S. Census
Bureau [2] population growth projections between the years 2000 and
2030 are for 82.1 million new people. That is a 29.2 percent growth,
and most of that growth will be in the regions heavily dominated by
private forest ownership [3].
How will this growth affect forestland use? We are distinguishing--
again, throughout this testimony--between sustainable forestland,
sustainable forest resources, and that without the land there can be no
resources. Nineteen million acres of forest converted to developed uses
from 1992 to 2020 in the Southeast [4]. The need for homes, churches,
public infrastructure, and other services of 21st century human
existence will cause fragmentation of forested landscapes, which will
have its greatest impact in the Southeast [5], the region with the
highest concentration of family forestland, but with a lack of other
regional sources of renewable energy other than forests. And private,
family forest landowners who manage smaller tracts of land are at
greater potential for development [6].
Traditional markets for forest commodities are trending offshore or
are impacted by poor trade policy. For example, as fewer and fewer
pulp/paper mills remain in this country, production has remained
unchanged--or slightly improved--but, geographic distribution and
access to those markets has degenerated:
136 pulp and/or paper mills closed, '97--'07 (none have been
built since 1989) [7]
331 softwood sawmills closed in the U.S. & Canada, '95--'07
[8]
314 furniture plants closed, '00--'08 (hardwood indicator)
[9]
In legislation and regulation, if we are truly to meet renewable
energy goals (whether electricity or biofuels), wood must be allowed to
make its full contribution. Some well-meaning organizations want
renewable energy, but want to dictate which forests can participate.
Currently, 92 percent of our nation's private forestland is natural
[12]. In the southeastern United States, on private lands, 88 percent
of forestland is natural [12]. However, with the current definition of
``renewable biomass'' for the Renewable Fuels Standard of the 2007
Energy Independence and Security Act (at its most restrictive),
America's natural private forestlands are excluded from participation
in the initiative to establish a renewable fuels industry. This kind of
policy creates disincentives for private forest landowners to continue
to hold and manage their forestlands. Anecdotally, we know that this
2007 language has already resulted in acres and acres of tree removals
for conversion to other land uses. This same definition will result, we
believe, in land dedicated to fuel production at the expense of other
traditional markets.
In order to promote the continuation of sustainably managed forests
on private lands, we must encourage markets for these landowners;
voluntary markets. No definition that harms capital investment in
energy facilities or taints the siting of those facilities can benefit
the future of America's forestlands. Without broad, inclusive
definitions for woody biomass, we are only encouraging the loss of
private forestlands to other uses that typically are less
environmentally friendly.
So, our growing population leads to conversion. Fewer markets and
less market access leads to conversion. And the constraints of new laws
lead to conversion. The message is that constraints on the resource
lead to conversion of forestland to other uses. How can one argue that
disincentives to keep an investment--in this instance, privately held
forestland--improve the likelihood of it continuance or its
sustainability?
Then, it is in the best interest of all who want to maintain a
forested America to seek out incentives for forest landowners. The
highest current concern to these landowners regards the definition of
``woody biomass'' in statute and regulation. That is, woody biomass
should be defined as ``wood'' in addition to wood residues, wastes,
and/or byproducts. Ultimately, we must sustainably harvest trees as
pulpwood, sawtimber, poles, pilings, chip-n-saw, OSB, wafferboard, and
``energy-wood.'' Landowners would like to see wood as an equal partner
with grains, grasses, and all cellulosic feedstocks.
references
[1] Wear and Greis, USDA Forest Service, Southern Forest
Resource Assessment.
[2] US Census Bureau Interim Projections Released April 2005
[3] Susan Stein, et. al., USDA Forest Service, ``Forests on
the Edge''
[4] David Wear, USDA Forest Service, ``Southern Forest
Resource Assessment''
[5] Susan Stein, et. al. USDA Forest Service, ``Forests on
the Edge''
[6] Butlerand Leatherberry, 2004. America's family forest
owners. Journal of Forestry 102 (7): 4-9
[7] American Forest & Paper Association, 2007
[8] USDA, ``Profile 2007: Softwood Sawmills in the US and
Canada''
[9] George Barrett, Hardwood Review
[1] New York Times, Jan. 6, 1905; http://query.nytimes.com/
gst/abstract.html?res=940DE4DE133AE733A25755C0A9679C946497D6CF
[2] ``Report on Terms Used in Biomass Credit Legislation''
BioResource Management, Inc., Richard Schroeder May 21, 2007
[3] 2002 Forest Resources of the United States, 2002. Gen.
Tech Rep. NC-241, Table 36
[4] Forest Resources of the United States, 2007. Gen. Tech
Rep. NC-xxx, Table 36 (with permission from Greg Reams,
National Program Manager, F.I.A.)
Responses of Scott P. Jones to Questions From Senator Sessions
Question 1. What are we trying to achieve through a Renewable
Electricity Standard (RES)? What are the goals? By focusing solely on
renewables, are we limiting our options to achieve an adequate supply
of clean, low-carbon, reliable, and affordable electricity?
If the main concern surrounding RES is to have clean energy, then
we should consider nuclear power. Nuclear power is produced in the
United States, it has zero carbon dioxide emissions, and it does not
put stress on agriculture products or the timber industry. Why has this
source not been considered in the RES discussion?
Answer. If an RES, an RPS, or any other energy provision, act, or
package is passed by Congress, all sources of domestic energy feedstock
are needed and should be used.
But, please allow a correction to the implication that stress will
be put on the timber industry. You may hear that adding a new RES
market to existing markets will create an unsustainable resource. It is
simply not true. We do not have enough markets for the wood that we are
growing, as shown in the USDA Forest Services Resource Planning Act
(RPA) data collected by the Forest Inventory Analysis program. The 2002
data showed that across all species in the United States, we were
growing 34 percent more volume then we removed [1]. Now, with the
reduction of forest products manufacturing, we have seen an increase in
the amount of growth versus removal. The 2007 RPA data shows a 41
percent volume grown over removal [2]. The impact of the reduction of
our forest products manufacturing is having a clear effect on the
amount of wood being grown and the threat to the health of our forests
and private forest landowners is eminent. We believe arguments to the
contrary are likely disingenuous and perhaps more motivated by
competition for raw materials, and/or feedstock preferences, and/or tax
avoidance than resource sustainability. The forest resource is
sustainable and this question has been asked and answered before. But,
the willingness of forest landowners to maintain forestland as
forestland has had too little attention. Federal forest policy must
address the conundrum of what would motivate a forest landowner to
continue to hold that investment when it is threatened by new and
evolving forces; whether it is opportunities for better financial
returns for their families, shrinking market access, or investment-
dampening legislation and regulation.
Question 2. Why do you include energy sources that may yield some
benefit in the future and do not have any short-term benefits, but
continue to exclude nuclear power that has both short-and long-term
benefits?
Question 3. The US consumes approximately 1,000 gigawatts of
electricity every year. The RES legislation would require approximately
200 to 220 gigawatts to come from renewable energy sources by 2020.
What percentage of the renewable energy mandate will be supplied by
wind and why does wind have a larger potential than other renewable
sources such as hydro or nuclear?
Question 4. In your opinion, how will the southeastern states meet
their mandate requirements since wind is not a significant energy
source in this region?
Answer. The southeastern states will need to tap their most
plentiful renewable resource, woody biomass. However, this will not
happen unless a broad definition of renewable biomass is enacted.
Question 5. How will a RES affect the price of electricity in
southeastern states?
Answer. As with all renewable technologies, renewable power
production is more expensive than current base load or peaking
capacity. Thus, it can be expected that ultimately, any mandated
renewable power mandate will increase the cost of electricity to the
rate payer. However, the advantage of biomass energy is that biomass
produces the least expensive power of all available and viable
renewable technologies; is base load, meaning it produces power all the
time as opposed to intermittently like wind and solar; and happens to
be the South's most abundant renewable resource. Biomass, in general,
has unique attributes among other renewable energy sources: it can be
burned in existing coal-fired power production with relatively minor
and inexpensive modifications; and it can be generated whenever the
biomass developer or utility chooses.
references
[1] 2002 Forest Resources of the United States, 2002. Gen.
Tech Rep. NC-241, Table 36
[2] Forest Resources of the United States, 2007. Gen. Tech
Rep. NC-xxx, Table 36 (with permission from Greg Reams,
National Program Manager, F.I.A.)
Responses of Scott P. Jones to Questions From Senator Mark Udall
Question 1. How important are markets for woody-biomass, such as
the one that could be created by the RES, in addressing forest health
threats including insects, disease, and wildfire, not only in Colorado,
but across the nation?
Answer. Healthy forests and strong markets go hand in hand. As a
part of maintaining and managing a forest, intermittent treatments to
remove poor quality material, dead or dying material as a result of
disease or insects, reducing fuel loads such as smaller diameter
understory, etc. becomes necessary. The justification for a private
landowner to be able to perform these treatments means that it must be
economically viable, thus either break even or generate a profit. Any
additional profit generated by the landowner will create cashflow that
can then be use to meet other landowner objectives, often times putting
money back into the land via establishing the ``next'' forest.
Question 2. By removing woody biomass in responding to forest
health threats and utilizing it towards renewable energy goals, what
types of activities can landowners take to ensure their lands continue
to be managed sustainably?
Answer. Private forests are already regulated extensively via the
Clean Air Act, the Clean Water Act, the Endangered Species Act, state
mandatory and voluntary programs such as BMPs and state administered
forest harvesting laws, cooperative agreements, and the like. All of
these aim at maintaining the values that we deem as important from our
nations private forests, such as clean air, water, protection of
wildlife, recreation, aesthetics, etc. These standards apply to all
harvesting removals from the forest, regardless of the type of product
removed, and will undoubtedly apply to the removal of woody biomass for
energy. Continued operation under this vast array of protections should
continue to provide the same level of protection currently enjoyed.
Appendix II
Additional Material Submitted for the Record
----------
Statement of KeLa Energy
KeLa Energy appreciates the opportunity to share our perspective on
Chairman Bingaman's proposal for a national Renewable Electricity
Standard or RES. Our company strongly supports policy efforts promoting
use of renewable energy and we believe that our technology can help the
nation achieve the renewable energy objectives specified in the
Chairman's proposal.
KeLa has patented an environmentally preferable fuel technology
that blends waste products that currently have very few end markets and
combines these wastes with renewable biomass to form a solid fuel that
produces numerous energy and environmental benefits. The blended
product can be used by electric utilities to generate power or by
industrial users to fire boilers for combined heat and power systems
and other applications.
The components of the fuel are:
Waste Carpet: carpet that is pulled from homes and
businesses during demolition and renovation that would
otherwise be destined for land disposal. Currently, landfills
receive between 7 and 10 billion pounds of carpet annually.
Recycled Plastics: plastic material diverted from landfills.
Consumer and industrial waste--including difficult to handle
mixed-stream plastics, plastic bottles, trays and other
materials.
Renewable, Carbon Neutral Biomass: saw dust and wood
residuals (bark, limbs, trimmings) from sustainable forestry
operations.
Coal Fines: these so-called fines are just that--coal
particles that separate from already-mined coal during
transportation or preparation that are too small to process and
lay in piles at impoundment sites. Currently, over 2 billion
tons of coal fines are resting in 700 impoundment sites with 50
million tons added every year.
The waste carpet and recycled plastics serve as binding agents for
the coal fines and biomass. The end product is a pellet that resembles
coal but with many enhanced performance characteristics:
Considerably higher (20 percent) BTU value compared to coal
Quick ignition producing less smoke on start-up than coal
Combusts efficiently with far less unburned carbon in ash
than coal (29% v. 2%)
Resists moisture so it can be stored outside
In addition to enhanced performance, the fuel produces important
emissions reduction benefits. KeLa fuel reduces carbon dioxide
(CO2) emissions by almost 12 percent compared to coal.
Sulfur emissions are reduced by 35 percent. Our certified test burns
also demonstrate lower nitrogen oxide (NOX) emissions, lower
volatile organic compound (VOC) emissions and reduced emissions of
hazardous air pollutants. These benefits are delivered utilizing fines
from coal that has already been mined, maximizing efficient use of the
resource. In addition, the blended product can substitute for coal in
the fuel delivery and combustion systems of existing boilers without
equipment modification.
The draft RES currently under consideration acknowledges
traditional sources of renewable energy. We are concerned that this
approach may risk excluding emerging fuel technologies like KeLa that
blend renewable energy sources with waste diverted material to produce
fuel that will help meet the legislation's objectives We understand
that a fuel comprised of renewable and waste diverted components may
not compare to virtual emissions-free performance that wind and solar
technologies boast. However, wind and solar capacity is not prevalent
in every region in the country. Moreover, the reduced emissions and
efficiency benefits that have been demonstrated in our test burns are
real and suggest that this fuel and others like it could serve as a
critical bridge technology that will facilitate movement toward a green
energy economy. As the Committee begins the process of further refining
the RES proposal, we respectfully request that clarifying language be
added to the bill that will allow emerging fuel technologies like ours
to qualify in a national renewable electricity standard.
We thank the committee for creating an opportunity to comment on
this important issue and look forward to working with you in the coming
months to craft a workable and balanced renewable energy policy.
______
Statement of Plum Creek Timber Company
introduction
Plum Creek Timber Company is pleased to submit these comments to
the Senate Committee on Energy and Natural Resources regarding the
proposal for a Renewable Electricity Standard (RES). Plum Creek owns
approximately 7.5 million acres of forest land in 19 states and is the
nation's largest owner of private land and the largest seller of wood
fiber. Plum Creek was also the first forest land owner to have its
lands nationwide certified as sustainably managed under a third party
program.
Plum Creek believes that woody biomass from forests can make an
important contribution to the nation's renewable energy goals if
allowed to do so, and should be provided equitable treatment with other
feedstocks and renewable energy technologies. With significant
experience in long-term forest management, Plum Creek is equipped and
willing to provide meaningful assistance to the committee as you seek
to formulate an effective RES.
Plum Creek is a member of the National Alliance of Forest owners
(NAFO) and also of the Forest Landowners Association (FLA) who have
both already submitted comments which we strongly support.
In our comments, we would like to highlight two important
underlying concepts and two policy considerations as you develop a RES.
Two underlying concepts:
1. New renewable energy markets can enhance the viability of
working forests and help ensure that the economic and
environmental benefits that forests provide society will
continue in the future. In other words, new renewable energy
markets are good for forestry and long-term forestland
ownership.
2. Meanwhile, forestry is good for renewable energy. Forests
can help provide a diverse, sustainable supply of renewable
energy feedstocks, and can help ensure that we meet our
renewable energy goals at reasonable cost, therefore imposing
no additional cost burdens on the federal government.
Two policy considerations:
A. RES should contain a broad definition for renewable
biomass in order to assure an adequate supply of resources to
meet energy objectives.
B. A RES should recognize the strong and effective existing
regulatory mechanisms already covering forestry activities.
two underlying concepts
1. New renewable energy markets are good for forestry
The availability of energy markets for wood fiber provides forest
land owners with a new tool to enhance forest health, to reduce forest
fire hazard, and to justify investments in forest productivity. New
wood fiber markets in renewable energy will promote thinning, forest
health treatments and improved forest utilization, which is
particularly welcome as traditional markets decline and, in some
locations, disappear.
The development of fiber markets for energy in this time of rapidly
shrinking pulpwood demand will provide an incentive for timberland
owners of all kinds to invest in their forests and to keep them in
forests rather than converting to other uses. Private forests can
increasingly provide for our renewable energy needs as forest
productivity increases while providing a valuable service in capturing
carbon from our atmosphere as well as the abundant other values that
forests provide the nation.
2. Forestry is good for renewable biomass
Our nation is endowed with a range of resources that can be used to
achieve renewable energy goals, and the use of woody biomass from
forests has some great advantages without which a RES is likely to fall
short of its goal.
Energy fiber can be produced as a co-product of forest
harvests and does not require land use conversion.
Biomass generated electricity provides base load power that
can be used as a valuable backstop for other kinds of renewable
electricity.
Forest biomass can be produced on a year-round basis and
does not require costly storage.
Feedstock collection and transportation infrastructure is
largely in place and will not require large scale
infrastructure development.
Forest biomass is plentiful in regions where other renewable
energy resources are lacking.
two policy considerations
A. A RES should contain a broad definition for renewable biomass
A broad definition for renewable biomass that includes whole trees
on private forest lands is important primarily for two reasons.
The first is that a limited definition can severely constrain the
amount of woody biomass that is available for meeting the RES. This
limitation is unnecessary and poses the risk of eliminating this option
as a viable contributor to the solution.
Consider that production tax credits have been available as
an incentive for the use of closed loop biomass for over 20
years and has not resulted in the production of a single
megawatt hour from a forestry feedstock source since its
inception. ``Closed loop'' is a definition that is limited to
biomass that is specifically grown as an energy crop.
The inclusion of wood that is ``waste'' or ``non-
merchantable'' includes some additional material, but this
additional material can only be collected after all other
commercial opportunities are exhausted. Energy fiber should be
allowed to compete in the market place with other uses of wood
fiber.
Some contend that limiting the definition of renewable biomass is
important because of a concern that new energy markets will encourage
land owners to harvest all of their forests today rather than growing
them for more valuable markets tomorrow. This contention is unwarranted
since the value of the fiber markets is the lowest produced from a
forest, and energy fiber is the lowest value among fiber markets, and
is therefore unlikely to drive the landowner's harvest timing
decisions.
Secondly, a definition that considers one part of a tree as
renewable and another part not to be carries with it unworkable chain-
of-custody implications that would be a disincentive to woody biomass
producers, especially given that energy material is often removed from
the harvest site after being chipped or ground up.
B. A RES should recognize the strong and effective existing regulatory
mechanism already covering forestry activities
Plum Creek is aware that certain interests are concerned that
renewable energy incentives for wood fiber will create unintended
consequences that need to be addressed and mitigated in the RES. These
concerns are unfounded, largely because of the existing regulatory
framework that governs forestry practices on forest lands throughout
the nation at the state level. This approach has successfully enlisted
landowners as partners with states without the force of direct federal
regulation. To be effective as an incentive to private landowners'
contributions to renewable energy, a RES must avoid new direct federal
forest practice regulation.
Every state with a forestry resource has a State Forester who is
responsible for implementing a framework of practices that address
environmental impacts related to forestry. This framework has been in
place for decades. The State Foresters work closely with state water
quality and wildlife agencies to implement oversight of forest
management activities in their respective states. This accountability
is supported by state sponsored monitoring which evaluates compliance
with state best management practices, forest practice regulations, and
accredited certification programs as well as evaluating effectiveness
of the practices themselves. Results of this monitoring over years have
demonstrated that this is a successful approach and is improving In
some places, the increased utilization associated with an available
energy market (biomass harvesting) has occurred for over 20 years hand
has been incorporated into this monitoring and feedback loop that
produces continually improving practices.
Additionally, federal involvement in forest practices adds a new
cost that is unnecessary and which the federal government can ill
afford.
conclusion
Thank you for considering Plum Creek's comments on this important
legislation. We look forward to working productively with a wide group
of stakeholders to help achieve America's energy goals.
______
Statement of George Fitch, Mayor, Warrenton, VA
Please accept my comments on an important exclusion which needs to
be addressed to realize the full potential of renewable energy
resources. I would like these comments to be part of the record for the
RES hearings:
The use of biosolids to produce different forms of renewable energy
can make an important contribution to the goals of reducing our
dependence on fossil fuels, reducing greenhouse gas emissions and
increasing the supply of energy from renewable resources. As Congress
has promoted the potential of other forms of biomass, and renewable
sources, to be used in the production of fuels and energy, Congress
should extend the same incentives to the use of biosolids in the
production of fuel. All other forms of biomass including agricultural
wastes, wood wastes and animal manures are identified as eligible
biomass for certain tax incentives and financial assisstance programs.
Biosolids is not included. Specifically, section 48 of the IRS Code
needs to be amended to extend the 30% investment tax credit to Combined
Heat & Power and other renewble energy facilities that use biosolids to
produce a biofuel. Also, Section 45 of the IRS Code needs to include
biosolids as an eligible biomass which when used to produce electricity
is entitled to the production tax credit.
Biosolids is used as a fertilizer in land application which often
creates an environmental hazard because it can seep into the watershed
and, in the case of Virginia and Maryland, end up in the Chesapeake
Bay. (See attachment).* Instead, with the same encouragement extended
by legislation to other forms of biomass, biosolids can be used to
create renewable energy.
---------------------------------------------------------------------------
* Graphic has been retained in committee files.
---------------------------------------------------------------------------
(Gina, as you might recall when I testified back in February 2007,
Senator DeMint encouraged me to look at all types of wastes for my
waste to energy project to make Warrenton and Fauquier energy
independent. Well, here's a waste that has been overlooked in the
discussion and legislation on renewable energy)
Please let me know if you require any additional information.
______
Statement of the Biomass Thermal Energy Council (BTEC)
The Biomass Thermal Energy Council appreciates the opportunity to
share our perspective on a proposed national Renewable Electricity
Standard (RES). BTEC is an association of biomass fuel producers,
appliance manufacturers, supply chain companies and non-profit
organizations that view biomass thermal energy as a renewable,
responsible, clean and energy-efficient pathway to meeting America's
energy needs. BTEC engages in research, education and public advocacy
for the fast growing industry of biomass thermal energy.
BTEC supports the committee's efforts at finding renewable energy
solutions. Our concerns with the current draft RES are grounded in the
proposal's narrow focus on electricity generation while overlooking the
benefits of thermal energy as part of a broader suite of renewable
energy solutions. Energy consumption in America can be divided roughly
into thirds: one third electric generation, one third transportation,
and one-third heating (thermal) (USDOE EIA). Federal and state energy
policy has focused almost entirely on electric generation and
transportation. State electric generation renewable portfolio standards
(RPS) now exist in 32 states (Database of State Incentives for
Renewables and Efficiency), providing powerful incentives for
investment in and development of solar, wind, hydro, biomass and other
electric generation renewable energy technologies. Federal production
tax credits exist for biomass, solar, geothermal and wind electric
generation. In recent years, federal policy has strongly supported
development of renewable transportation fuels such as grain-based and
cellulosic ethanol and biodiesel, through strong research and
development support, demonstration project funding, and direct
production credits and subsidies.
Yet virtually no such support exists for thermal renewable energy
technologies (except for some limited residential tax credits). The use
of biomass to produce thermal energy must compete for finite feedstocks
with electric and transportation fuel technologies that are strongly
supported through subsidies; an unlevel playing field that places
biomass thermal at a competitive disadvantage. For example, in New
Hampshire there are seven commercial wood-fired power plants,
collectively consuming approximately 1.7 million green tons of wood
biomass annually to produce about 165 MW of electric output. Operating
revenues at these facilities are supplemented by federal production tax
credits and sale of renewable energy credits in New England states with
RPS programs. Biomass heating must compete for wood resources that are
artificially elevated in cost by these subsidies, yet the same public
policy goals that provide the rational basis for these subsidies are
also met by using biomass to make heat--at much higher energy
conversion efficiencies than electric generation.
The Biomass Thermal Energy Council supports outcome-based energy
policy, rather than technology--based energy policy. We believe that
policy should encourage energy technologies that maximize efficiency,
minimize carbon emissions, reduce or eliminate demand for imported
fossil energy, and reduce harmful air emissions such as particulate
matter, and acid rain caused by SO2 and NOX.
Policy should support those technologies that achieve the greatest
combination of net benefit in furtherance of these attributes. For
example, biomass is converted to electric energy at an efficiency rate
of about 20-40%; biomass is converted to a liquid transportation fuel
at an efficiency rate of about 40-50%; biomass can be converted to heat
energy at an efficiency rate of 85-95%. However, our federal policy
promotes and encourages biomass electric and cellulosic ethanol
technologies, but provides virtually no support for the much more
efficient biomass thermal technologies. As the committee continues to
refine the RES proposal, we respectfully request that provisions be
added that recognize the considerable benefits of thermal energy. For
example, we would support 1) adding language that requires biomass
electric generation to qualify for renewable energy credits only if it
meets a minimum efficiency threshold of 50 percent (with credit for
thermal output), effectively requiring cogeneration, 2) allowance for
renewable energy credits for any thermal output from existing biomass-
fueled cogeneration facilities, and 3) a commitment by Congress and the
administration to fully analyze the mechanisms to extend similar
incentives and credits for thermal renewable energy technologies, e.g.
biomass, solar thermal, and geothermal. we have specific suggestions
for language that we would be pleased to share with the committee.
We thank the committee for creating an opportunity to comment on
this important issue and look forward to working with you in the coming
months to craft a workable and balanced renewable energy policy.
______
Statement of John Droz, Physicist & Environmental Activist, Brantingham
Lake, NY
Thank you for reaching out for inputs from experts and concerned
citizens concerning the possibility of a national Renewable Portfolio
Standard.
I am a physicist (with electrical energy expertise) with a 25+ year
record as an environmental activist.
My concern with some of the terms and conditions of the Economic
Stimulus package, is that federal and state governments are about to
throw a few hundred billion dollars down the drain. We cannot afford
that!
What's worse is that their likely plan will essentially assure (if
Dr. Hansen, Al Gore, etc. are right) that we will have an environmental
calamity of historic proportions.
This is all coming about for one very simple reason: solutions to
our very real energy problems are being driven by lobbyists, not the
science.
For instance, the carte blanche support of essentially all
renewables--as if they are all roughly equivalent sources of electrical
power--is inaccurate, and is not scientifically supportable.
We should indeed be seriously considering alternative sources of
electrical power, but the criteria should be that they would only
receive government support (e.g. via RPS, PTC, etc.) if they are are
least equal to existing sources of electrical power.
``Equal'' would be such well-defined grid considerations as
reliability, predictability, dispatchability, cost, etc.
Determining whether or not alternatives meet this critical criteria
is a straightforward matter: subject each candidate to scientific
methodology.
So far, this has NOT HAPPENED with heavily promoted renewables like
wind power and solar power.
The good news on all this is that I have a guaranteed solution--and
one that will cost us nothing! [See attached article about EEA.]
Let me make an analogy here. Let's say I came to you 6 years ago
and asked that the applicable senate committee do a well-researched
series on subprime lending, and its offspring (e.g. derivatives).
PBS had a recent special about how (with all the financial geniuses
we have in the US) that we've gotten ourselves into such a financial
mess. Interestingly the experts interviewed identified the exact same
reasons that exist today regarding electrical energy: 1) we were too
trusting, 2) the plans were built on faulty premises, 3) no thinking
outside the box was listened to, etc.
If an objective, comprehensive analysis had been done then,
consider the extraordinarily enormous positive ramifications that would
have had on hundreds of millions of Americans--indeed on billions of
people world wide.
Without exaggeration, this situation is of equal magnitude to the
subprime fiasco. Indeed there are many that believe that the fate of
the planet is at stake based on what we do right now.
Please read the attached ``RPS--An Illusion of a Solution'' (PDF)
for a different perspective on this matter.
In short, the implications of the energy policies we are adopting
(e.g. RPS's, blind support for all things renewable, not genuinely
supporting nuclear power, etc.) all will have EXTRAORDINARILY NEGATIVE
ECONOMIC & ENVIRONMENTAL CONSEQUENCES for our country.
The solution is to carefully assess our options, and choose only
those that have been independently and objectively proven to make
scientific, economic and environmental sense.
______
Statement of Laurence D. Wiseman, American Forest Foundation
The American Forest Foundation, a nonprofit conservation
organization that focuses on ensuring the continued viability of
America's family-owned forests, believes that family forests offer
tremendous potential as a source of clean, renewable energy to fuel
both our nation's electricity and fuel needs. If Congress is to pass a
renewable electricity mandate, such as that included in the draft
legislation being considered by this Committee, it must allow for
electricity generation from sustainable biomass from family forests.
Currently, biomass supplies roughly three percent of our total
energy consumption in the U.S. Most of this is consumed through
industrial heat and steam production at pulp and paper and other wood
manufacturing facilities. If you consider current forest inventories,
family forests can sustainably supply a significant portion of
additional biomass, which can be used to heat and power millions of
homes or fuel millions of vehicles.
While providing the nation with renewable energy, biomass
harvesting from family forests can also increase the economic and
environmental viability of these forests, helping landowners practice
conservation and stay on the land.
Because of the benefits for family forest owners and the
environment, the American Forest Foundation supports increased
opportunities for the production of renewable energy from sustainably
managed family forests.
To increase opportunities for renewable energy production from
sustainable family forests biomass, Congress should enact renewable
energy policies that:
Allow all sustainably harvested forest biomass: renewable
energy policies, whether incentives or mandates, should
encourage the use of all forest biomass that is harvested
sustainably, including with verification through appropriate
mechanisms.
Encourage family forest owner participation in markets:
renewable energy policies should ensure that small family
forest owners can participate in market opportunities and avoid
overly burdensome requirements that would prevent landowners
from participating.
Ensure long-term viability of the industry: renewable energy
policies should encourage a long-term, sustainable, renewable
energy industry that supports strong rural economies and
healthy forest landscapes.
Help Supplement forest products markets: Renewable energy
policies should supplement, not replace, existing forest
products markets.
Consider Impacts on Forest Resources: Policies that
encourage energy production from forest biomass must consider
both the short and long-term impacts of renewable energy
markets on forest resources and avoid incentives that lead to
unsustainable forest management practices.
Unfortunately, a previous market setting standard, the Renewable
Fuels Standard, includes a very narrow definition of the forest biomass
that is considered renewable under the standard. This definition
restricts the use of biomass harvested from naturally regenerated
forests, new plantation forests, and other ill-defined forest
categories. We urge the Committee to avoid this prescriptive approach
and instead encourage inclusion of all biomass that is harvested
sustainably.
It will be very difficult to meet a renewable electricity mandate,
particularly in the southern part of the U.S., unless sustainable
forest biomass is considered renewable and can be used to meet the
standard.
It is critical however, that we utilize this tremendous resource in
a sustainable way--ensuring that family forests can continue to be a
renewing, clean resource that the nation can depend on.
Each year, the American Forest Foundation trains 30,000 educators
and helps over 90,000 family landowners manage forests for wildlife,
habitat, recreation and sustainable products. Through our programs such
as the American Tree Farm System, and our conservation work on the
ground, the Foundation strives to create new opportunities to help
family forest owners stay on the land and manage it sustainably.
Members of the Tree Farm system and participants in our other forest
programs are committed to conservation and sustainable management,
helping to ensure Americans have clean water and air, recreational
opportunities, wildlife habitat, beautiful scenery, and products,
including renewable energy.
The American Tree Farm System is an internationally recognized and
credible forest certification system, recently recognized by the
Program for the Endorsement of Forest Certification Systems (PEFC).
Family landowners certified in this system agree to comply with 9
standards of sustainability, have a management plan that guides their
forest management activities over the long-term, comply with all
federal, state, and local laws, and agree to periodic auditing and
verification of their forest management.
Across the country there are over 10 million family forest owners
who own nearly two-thirds of the private forestland in the U.S. These
lands are critical national infrastructure, especially as climate
change calls for additional carbon storage to reduce greenhouse gas
emissions and demands increase for renewable energy to reduce our
reliance on foreign energy sources.
Producing renewable energy from sustainable family forests, gives
family owners additional markets and revenue streams for their
products. As traditional wood products markets, like those for paper or
furniture products, continue to decline, family forest owners are left
looking for other sources of revenue to help them stay on the land and
keep their investment in their forest viable. AFF strongly believes
that any renewable energy incentives should help supplement, not
replace existing forest products markets. We believe both market
opportunities have value and we can accommodate both on the landscape.
While the markets for real-estate are low in many areas, family
forest owners, particularly in rapidly growing areas, still feel the
pressure to sell their land when developers come knocking. National
averages point to a loss of roughly 2,000 acres a day of forests, as
they are converted to parking lots, strip malls, and condominiums,
never to be recovered. Annually, this amounts to about 1 million acres,
an area roughly the size of the state of Delaware.
In addition to forest loss, forested tracts are being broken up
into smaller tracts at alarming rates, as more people move into
forested areas. The US Forest Service predicts that by the year 2030,
roughly 44.2 million acres of forests will see substantial increases in
housing density.
As you can see, the pressures are mounting, as family forest owners
strive to stay on the land and keep their land as forests.
Yet communities across America need privately owned forests to
ensure clean water, wildlife habitat, recreation, and the many public
benefits forests provide. Good forest management practices can also
help reduce flooding, decrease the risk of large and uncontrolled
fires, and reduce carbon from our atmosphere. Each year, our nation's
forests capture and store ten percent of our total U.S. carbon
emissions.
Harvesting renewable energy from family forests in a sustainable
manner will provide an important tool to help family forest owners stay
on the land and maintain healthy, working forests in communities across
America.
Most renewable energy markets will rely on small diameter trees,
tops, limbs and residues, and trees removed to allow room for healthier
trees to grow. Removing these materials can increase the health of
forests, making the forest more resilient when impacted with insects,
diseases, or wildfires. Often, removing these materials improves
wildlife habitat and forage areas for key species.
Many existing forest management tools, such as forest certification
systems, management planning, professional forester involvement, and
the implementation of best management practices, are in place to help
family forest owners to manage their lands sustainably. We urge the
Committee to utilize these existing tools to the greatest extent, and
avoid new stipulations that would reduce the viability of the biomass
market for small forest owners.
The American Forest Foundation looks forward to working with you to
craft legislation that addresses the above issues and gain support for
these concepts.
______
Statement of the National Association of State Foresters
The National Association of State Foresters (NASF) greatly
appreciates the opportunity to provide a written statement to the
Senate Energy and Natural Resources (Committee) majority staff
regarding a proposed federal renewable electricity standard (RES). NASF
is a non-profit organization comprised of the directors of all state
and territorial forest management agencies in our country. Our members
have a public trust responsibility for managing and protecting two-
thirds of the nations' forestland, which is held in private or state
ownership. NASF views forests as a strategic national resource and
offers the following recommendations as the Committee and Congress work
toward a solution addressing climate change and the nation's economic
and energy security needs.
I. NASF Supports an RES that Takes Advantage of Forests' Energy and
Climate Benefits
NASF promotes the development of policies and programs related to
harvesting forest biomass for energy that ensure the sustainability of
forest resources. State Foresters approach issues related to wood-based
bioenergy and renewable fuels from the following perspective:
NASF views forests as a strategic national resource and
supports diverse and robust markets for the full spectrum of
woody materials to allow landowners and forest managers to
practice sustainable forestry. Emerging and existing markets
for wood-based bioenergy and renewable fuels offer new
opportunities to utilize previously unused, unmerchantable
material.
Intensive forest management can improve growth rates and
productivity of forest stands resulting in increases in woody
biomass (and other forest products) and greater ability of
forests to sequester carbon.
Woody-biomass is a secure, cost-effective source of
renewable energy, which--in many cases--is produced locally and
can generate revenue for urban and other forest-based
communities. Biomass electric facilities can create between 2.4
and 5.0 direct jobs for each MWH of installed capacity.*
---------------------------------------------------------------------------
* Innovative Natural Resources Solutions. 2008. A Strategy for
Increasing the Use of Woody Biomass for Energy. Prepared for the
National Association of State Foresters Forest Markets Committee. Last
accessed online at: http://www.stateforesters.org/
---------------------------------------------------------------------------
Forest residues in the United States can generate enough
electricity (56 million MWH) to power all of Wyoming, Montana,
Delaware, DC and Vermont annually. These same 93 million green
tons of residue could alternatively produce four billion
gallons of ethanol to displace the gasoline used each year in
Washington, D.C., Delaware, Maryland, New Jersey and
Pennsylvania.*
ii. federal policy should not interfere with the ability of the
nation's forests to sustainably contribute to renewable energy
Forestlands in the U.S. can produce 368 million dry tons of biomass
feedstock annually, yet the country currently derives only three
percent of its energy from wood. Woody biomass as a fuel source has the
potential to create thousands of new jobs and substantially increase
the percentage of renewable sources needed to meet the nation's energy
demands. Sustainably managed trees and forests can mitigate and adapt
to climate change while providing other societal benefits such as clean
air and water, wildlife habitat, recreation and thousands of forest
products. Trees in urban areas provide enormous savings in commercial
and residential energy costs and provide environmental air and water
benefits beyond any other form of engineering. Wood-based bioenergy
initiatives are also providing new markets that give landowners more
options to retain and manage their forests while generating income and
promoting economic development in forest-based communities. Realizing
these benefits, however, will hinge on Congress' ability to craft
federal policy that does not interfere with the ability of all the
nation's forests to potentially contribute to renewable energy.
NASF has particular concerns with the current definition of
eligible biomass found in the Energy Independence and Security Act of
2007 (EISA). As it stands, the definition severely constrains the
ability of non-federal forest lands to supply feedstock to our nation's
renewable fuels goals. Mandating that the over two-thirds of our
nation's forests that fall outside of federal ownership can only supply
feedstock as a byproduct of other production ignores the fact that our
state and private forests can supply biomass effectively and in an
environmentally sustainable manner. Limiting the ability of forest
landowners to profit from their forests increases the likelihood that
the forest will subsequently be converted to some form of non-forested
development. New plantations either established on bare land or
converted from other vegetative cover after the date of enactment do
not qualify as source material.
The current definition also effectively and practically eliminates
the ability of our public forest lands to supply feedstock for
renewable fuels. Permitting public forest lands to supply feedstock
would provide a multitude of benefits, including improved overall
forest health and the reduction of the hazardous fuels that serve as
the lynchpin for catastrophic wildfire. The exclusion is overly
restrictive--particularly in light of the extensive network of federal
environmental laws (e.g., NEPA, NFMA) which guarantee sustainability--
and essentially eliminates market forces from helping cover the rising
costs of forest health and fuel reduction treatments at a time when
warming climates and limited budgets suggest it is needed most.
iii. federal policy should provide states flexibility to help
accomplish renewable energy goals
State Foresters have statutory authority to ensure the
sustainability of the nation's nearly 500 million acres of state and
private forests. The forest types in each state are as diverse as the
people and the economies in which they are situated. As a result, a
national, one-size-fit all approach to defining forest management and
land use policy in an RES will be problematic as it does not reflect
the diverse and unique context for each and every forest and the laws
of each state. NASF supports shifting focus of criteria away from
federal definitions and towards addressing sustainability through
existing tools, common forestry practices and other well established
procedures. State Foresters are best-positioned to make decisions
regarding sustainable forest biomass utilization that do not adversely
impact local forest conditions.
NASF supports an approach that takes advantage of the strong
environmental record provided by the vigorous network of federal and
state laws and regulations alongside other voluntary programs that
provide the necessary safeguards for woody-biomass removals.
Accomplishing renewable energy goals should rely on the ongoing work of
federal natural resource agencies, state forestry agencies and state
forest management Best Management Practice (BMP) bodies, and
nongovernmental natural resource professionals.
State Foresters want to ensure sustainability in an RES, while
avoiding impractical prescriptions and pricing biomass utilization
systems out of the range of feasibility. Sustainability requirements
should be defined by the state, be feasible in implementation and
enforcement, and should limit administrative, ``transaction'' and
operational costs to allow all forest landowners to participate.
Without these elements, forests--particularly from the 10 million
small, non-industrial ownerships--will play a limited role in meeting
the RES.
iv. broad definition of forest biomass should be included in a federal
renewable electricity standard
NASF urges a broad definition of renewable biomass that fully
recognizes that all of our nation's forests are a renewable resource
and ready source of biomass feedstock regardless of the political
boundaries that surround them. Restricting wood from private lands and
prohibiting the use of wood from federal lands are unnecessary
constraints that leave out completely sustainable and readily available
sources of green energy. This will needlessly hamper our nation's
efforts to address greenhouse gas emissions and national security
concerns related to reliance on foreign fossil fuel sources.
A broad definition in the RES can help address many of the barriers
which stand in the way of meeting management objectives on all of the
nation's forests. First, it can help generate critical markets for
woody biomass which provide new income sources for families and
individuals helping them cover their costs to own and maintain their
forests. Keeping forestlands working and sustainable is a primary
driver for our policy positions. Second, new markets are accompanied by
new industry and an opportunity for communities to create and maintain
family-wage jobs and diversity their economies. Third, local biomass
markets provide new opportunities for public land managers to treat
more ``at-risk'' acres, dispose of slash in way that is timely, and
reduce emissions released by wildfires.
v. nasf is ready to help craft responsible renewable energy legislation
that benefits the nation's forests
NASF commends the Committee and Congress on addressing the immense
challenge of reducing the nation's dependence on fossil fuels. All
renewable resources will be needed to meet the country's energy needs.
Forests have a key advantage given their ability to produce energy
independent of atmospheric conditions that other renewable sources are
subject to. NASF believes there are constructive and practical options
to consider as we work to ensure the sustainability of our nation's
forest resource. We stand ready to help craft a RES that addresses
sustainability concerns related to forests in a way that draws upon the
strength of existing--and adapting where necessary--forest practices to
meet local forest conditions.
______
Statement of the Society of American Foresters
On behalf of the Society of American Foresters (SAF), which
represents every segment of forestry in the United States with more
than 14,000 members, please accept the following testimony for the
Hearing Record on the Renewable Electricity Standard (RES) held
February 10, 2009.
As an organization chartered to advance the science, education,
technology, and practice of forestry for the benefit of society, the
SAF believes that woody biomass energy from our nation's forests is
part of the solution to supplying America with reliable renewable
energy. As the Senate is aware, it is distressing that at a time when
considerable efforts are being made to address global climate change--
by preventing the conversion of forests to competing uses and by
mitigating the likelihood of increasingly devastating wildfires--the
definition of ``biomass'' in a federal RES could needlessly limit the
management options available to federal land managers, and diminish the
market incentives available to private forest landowners that allow
them to resist development pressures and maintain their land as forest.
We commend the Senate's efforts to craft a more scientifically,
socially, and ecologically appropriate definition, which can help
balance the nation's most pressing forest management needs and
safeguard the important environmental and societal values our
forestlands provide.
SAF supports strategies and policies that promote the development
of economically and environmentally viable forest biomass energy
production together with those that assist communities, forest owners,
public forest managers, and local entrepreneurs in accomplishing urgent
wildfire prevention and forest health improvement projects. This
includes appropriately defining ``woody biomass'' in any federal
legislation.
Increased utilization of forest biomass will also help combat
global climate change and improve the nation's energy security by
providing an abundant, renewable fuel resource as a substitute for
imported fossil fuels in both public utility and industrial power
generation facilities. On public lands in the West, many of the
silvicultural treatments prescribed to reduce the risk of catastrophic
wildfire and improve forest health will generate large volumes of
forest biomass. Increased utilization of forest biomass can improve
forest conditions in the eastern and southern states as well, where
additional markets for low-quality and small-diameter trees also will
enable forest managers to improve forest health. On other forests, both
public and private across the country, forest health and restoration
treatments are needed to control insects and disease and to improve
wildlife habitat and watersheds. This type of management can be costly,
as much of the biomass removed currently has little to no value. An
RES, structured appropriately, would help to create a market for woody
biomass. This, in turn, could encourage much-needed forest health or
fuels reduction projects by offsetting some of the cost of biomass
removal. An RES with a restrictive, one-size-fits-all definition would
encourage the opposite.
Lately, there has been much discussion of the sustainability of
biomass power generation under a federal RES. There are two potential
approaches to addressing sustainability. An outcome based approach
would allow a broad definition and the flexibility to manage forestland
sustainably. Ideally, on private land, this would be done with the
assistance of a professional forester who writes a management plan that
addresses soil conservation, water quality, wildlife habitat, and
biodiversity. This approach would allow management decisions to be site
specific and unique to the forest stand being managed. It also would
serve as a powerful incentive for landowners to consult with
professional foresters to promote best management principles, and to
allow management efforts to adapt to changes in the landscape or as new
science and management techniques become available (i.e., adapting
climate change or other disturbances).
The second approach is prescriptive and process-based, and would
include a one-size-fits-all definition that precludes certain biomass
through diameter limits or other prescriptive requirements. Although
this method may give some interested parties a level of comfort, it is
a disservice to our nation's forests and has no basis in science.
Forests are complex, diverse, and in constant flux as a result of
natural and man-made disturbances. No two acres are alike and, as such,
no two acres should be treated alike. Thus, a prescriptive definition
could serve as a disincentive to restore forest health in many areas,
because federal requirements would be too onerous and may even
contradict necessary silvicultural treatments. The 2007 Energy Bill's
Renewable Fuels Definition of ``renewable biomass'' is a good example
of this problem.
In regard to public lands, the SAF believes current laws and
regulations, such as the National Environmental Policy Act (NEPA),
National Forest Management Act (NFMA), and the Federal Land Policy and
Management Act (FLPMA), provide more than adequate requirements for the
sustainability of biomass removal. Past biomass definitions have
excluded areas such as Wilderness, Wilderness Study Areas, and
inventoried Roadless areas. Although this is politically
understandable, from a forestry perspective it makes little sense. Some
of these areas are in need of habitat restoration, insects and disease
containment, or fuels reduction projects, which could maintain the
character of these special designations while simultaneously improving
forest health. Land managers in the Forest Service and Bureau of Land
Management should decide what projects are needed and where. The
biomass from these projects should count toward an RES that helps
offset the cost of removal and stretch appropriated dollars toward the
further improvement of public lands.
Finally, it's important to remember that forest resources are
renewable. Although some biomass may be removed from public or private
land, it will inevitably grow back and likely need to be removed again.
There are roughly 20 billion board feet of new growth and 10 billion
board feet of mortality on our national forests every year. In
contrast, there are (on average) two billion board feet of removals. As
we discuss the sustainability of biomass, which is imperative, we
cannot forget that we are losing ground in our efforts to restore
public forests. We also must remember that creating a viable biomass
market through an RES will help protect private forestlands from
development and safeguard the environmental and economic benefits on
which we all depend.
______
Statement of the National Alliance of Forest Owners
introduction
The National Alliance of Forest Owners (NAFO) is pleased to submit
comments to the Senate Committee on Energy and Natural Resources
(Committee) majority staff draft for a Renewable Electricity Standard
(RES) proposal. NAFO is an organization of private forest owners
committed to promoting Federal policies that protect the economic and
environmental values of privately-owned forests at the national level.
NAFO membership encompasses more than 74 million acres of private
forestland in 47 states. NAFO members are well positioned to help our
nation meet its renewable energy objectives, and NAFO is prepared to
work with the Committee and Congress toward that end.
Private working forests are a fundamental part of the strategic
natural resources infrastructure of our nation, producing renewable,
recyclable and reusable wood and paper products, sustaining plants and
wildlife, producing clean water and air, and providing recreation
experiences. Working forests also play a substantial role in helping
this country achieve energy independence while reducing greenhouse gas
(GHG) emissions. Forest biomass is a renewable energy feedstock that
can help meet our national renewable energy goals in all regions of the
country, if placed on a level playing field with other renewable energy
sources.
NAFO asks this Committee to recognize biomass from private working
forests as an eligible feedstock on an even playing field with other
renewable energy sources as it 1develops a federal renewable
electricity standard. The RES should recognize that forest owners
already work within a well established framework of laws, regulations
and non-regulatory programs and actions that promote and maintain
responsible forest management, and will continue to do so as they help
our nation meet its renewable electricity objectives.
ii. our nation will not meet its objectives to increase our reliance on
secure, domestic sources of renewable energy without the contributions
of working forests
Wood is a dependable, domestic renewable energy resource that can
be utilized for energy production through a variety of processes like
biomass generation, wood gasification, and conversion to cellulosic
biofuels. Wood, wood residuals and other plant material can be utilized
to produce steam and heat hot water boilers. Steam can be converted to
electrical power by turbines or used to heat to buildings through
piping distribution networks. Newer ``wood gasification'' technologies
heat wood in an oxygen-starved environment, collect gases from the
wood, and later mix the gases with air or pure oxygen for combustion.
Wood gases can be cooled, filtered, and purified to remove pollutants
and used as fuel for internal combustion engines, micro-turbines, and
gas turbines.
As members of the Committee have discussed in the past, a federal
RES that does not appropriately include all forms of forest biomass
poses challenges to regions of the country where forest biomass is the
prevailing renewable energy source and where wind, geothermal, solar or
hydroelectric power are not expected to make a significant
contribution. Biomass, for example, already produces roughly 53 percent
of the nation's non-hydro renewable electricity.\1\
---------------------------------------------------------------------------
\1\ U.S. EIA at www.eia.doe.gov/cneaf/alternate/page/
renew_energy_consump/table3_html--Biomass is the primary energy source
for 55.4 billion kilowatt hours of the 103 billion kilowatt hours of
non-hydro renewable energy produced in 2007 (preliminary figures,
subject to revision).
---------------------------------------------------------------------------
Existing state RES policies reflect the importance of utilizing
biomass to successfully lower demand for traditional fossil fuels. To
help meet renewable energy goals, at least 25 states and the District
of Columbia have all included biomass as a renewable generation source.
A federal standard that does not acknowledge or encourage the full use
of forest biomass could jeopardize the nation's ability to meet its
overall renewable energy objective.
iii. definitions of eligible biomass feedstock should put working
forests on an even playing field with other renewable energy sources
Definitions of qualifying renewable energy feedstocks should
provide a level playing field for market access across all feedstock
sources and encompass the full range of forest biomass, including trees
and other plants, forest residuals (e.g., tops, branches, bark, etc),
and byproducts of manufacturing (e.g., sawdust, bark, chips, dissolved
wood retrieved from the paper-making process, etc). Presently there are
at least four different definitions of qualifying forest biomass in
federal statute\2\. This adds complexity and confusion to project
developers, biomass producers and federal program administrators who
are required to determine how the various, and at times conflicting,
definitions interact with one another.
---------------------------------------------------------------------------
\2\ Separate definitions of eligible forest biomass can be found in
Section 45 (c)(3) of the Internal Revenue Code (26 U.S.C. 45(c)(3));
Section 203(b)(1) of the Energy Policy Act of 2005 (42 U.S.C.
15852(b)); Section 201(1)(I) of the Energy Independence and Security
Act of 2007 (42 U.S.C. 7545(o)(1)(I)); and Section 9001(13) of the
Food, Conservation, and Energy Act of 2008 (7 U.S.C. 8101 (12)).
---------------------------------------------------------------------------
NAFO has particular concern about the definition of eligible forest
biomass found in the Energy Independence and Security Act of 2007
(EISA). As currently written, this definition places confusing
parameters on significant acreages of private forestlands in the form
of land use restrictions. These restrictions limit the ability of
forest biomass to contribute to meeting the ambitious mandate to
produce 36 billion gallons of renewable fuels annually by 2022.
The EISA definition significantly restricts the use of forest
biomass from naturally growing and regenerating forests, which make up
more than 90 percent of our nation's non-federal forests. By doing so,
it removes potential markets and viable economic options needed by
private forest owners to support thinning for a variety of sustainable
forest management practices, and who are already experiencing economic
pressures from the steep declines in traditional markets such as solid
wood and pulp and paper manufacturing. It also places forest biomass at
a significant disadvantage to other biomass feedstocks, such as short
rotation agricultural crops that require more energy, nutrients and
water to grow, as well as other renewable energy sources.
If applied to a federal renewable electricity standard, the
definition of qualifying forest biomass in the EISA could discourage
necessary and appropriate forest management activities that promote
forest health and sustainability. It also creates complex chain-of-
custody requirements that could cause electricity producers to exclude
large portions of potential feedstock supply in order to meet
compliance requirements. If identifying qualifying feedstock becomes
too complex or costly, project developers may forego the development of
facilities that use forest biomass altogether, thereby placing the
overall RES in jeopardy.
iv. utilizing working forests will both meet our nation's energy needs
and help reduce atmospheric greenhouse gas (ghg) concentrations
Experts have long recognized working forests as a source of real
and verifiable reductions in greenhouse gases and a cost-effective
source of industrial GHG offsets. The United Nations' 2007
Intergovernmental Panel on Climate Change (IPCC) highlights forest
management as a primary tool to reduce GHG emissions. The IPCC states
that, ``In the long term, a sustainable forest management strategy
aimed at maintaining or increasing forest stocks, while producing an
annual sustained yield of timber, fiber or energy from the forest, will
generate the greatest mitigation benefit''.\3\
---------------------------------------------------------------------------
\3\ Climate Change 2007: Mitigation. Contribution of Working Group
III to the Fourth Assessment Report of the Intergovernmental Panel on
Climate Change [B. Metz, O.R. Davidson, P.R. Bosch, R. Dave, L.A. Meyer
(eds)], Cambridge University Press, Cambridge, United Kingdom and New
York, NY, USA, page 543.
---------------------------------------------------------------------------
Similarly, the EPA has concluded that there is ``scientific
consensus' that the carbon dioxide emitted from burning biomass will
not increase CO2 in the air if it is done on a sustainable
basis.''\4\ This position is supported not only by the IPCC, but also
by the Energy Information Administration (EIA), the World Resources
Institute (WRI) and other credible scientific bodies.
---------------------------------------------------------------------------
\4\ U. S. Environmental Protection Agency Combined Heat and Power
Partnership, Biomass Combined Heat and Power Catalog of Technologies,
96 (Sept. 2007) available at www.epa.gov/chp/documents/
biomass_chp_catalog.pdf.
---------------------------------------------------------------------------
Appropriately including forest biomass in an RES standard would
take full advantage of these carbon mitigation benefits in the energy
context. Likewise, a policy that discourages forest biomass utilization
will forfeit these benefits, particularly in areas where fossil fuels
are the predominant source of energy production and where alternative
forms of renewable energy, such as wind, solar and geothermal, are not
viable options.
v. forest owners work within a well-established framework of laws,
regulations and non-regulatory programs and actions that maintain
responsible forest management
Private forestry operations are regulated by a fairly complex set
of laws, regulations, and non-regulatory policies at the federal, state
and local level. While the resulting framework is fairly complicated
and can vary widely between jurisdictions, overall it has been very
effective in improving the environmental performance of forestry
operations, and can be expected to do so in the future.
Under this framework, working forests provide significant
environmental benefits while providing important economic benefits like
renewable energy. Watershed protection, wildlife habitat, carbon
dioxide absorption, and other ``environmental services'' are currently
provided by private landowners at little or no cost to society.
Whenever policymakers consider new environmental requirements on
private forestry, such as eligibility requirements for forest biomass
intended for energy use, the implications for the economic viability of
working forests should be considered. If new regulatory requirements
reduce the private forest owner's ability to realize value from a
working forest; or if new market limitations constrain market
opportunities for working forests, private forest owners might be
compelled to consider other uses for their forests, which could result
in the reduction of many of the broader environmental benefits they
provide.
Attached is a white paper describing the various federal, state and
local laws, regulations and non-regulatory programs and activities
influencing private forest management. We anticipate that this summary
will be helpful to the Committee in comparing the environmental
performance of private forests to other biomass feedstock sources and
ensuring that new policies do not duplicate, complicate or jeopardize
the already successful delivery of environmental benefits provided by
current forest practices.
vi. nafo is prepared to work with congress and other stakeholders to
realize the contributions of working forests in energy policy in an
environmentally responsible way
NAFO is prepared to help develop a constructive approach to using
forest biomass to help meet our nation's energy needs. Notwithstanding
the strong record of environmental benefits private forests
provide,NAFO is prepared to work with policy makers and other
stakeholders to ensure that forest biomass, and all other sources of
renewable energy, help meet our renewable energy objectives in an
environmentally responsible way.
NAFO suggests the Committee apply the following principles when
crafting legislation addressing the eligibility of forest biomass as a
renewable energy source
1. Federal renewable energy policy should promote rather than
discourage the use of forest biomass for renewable energy.--
Federal policy, and definitions of qualifying forest biomass in
particular, should be broad and inclusive so as to encourage
forest biomass utilization and foster cost-effective
compliance. If definitions and compliance requirements become
too complex (e.g. the RFS definition), they will place forest
biomass at a disadvantage with respect to other feedstocks or
renewable energy sources and ultimately discourage its use.
This, in turn, would jeopardize the overall goal of the RES and
potentially reduce the carbon mitigation and other
environmental services private working forests provide.
2. Federal policy should acknowledge and support existing
federal, state, local, and nongovernmental forestry practices
and capabilities.--Federal policy should acknowledge and
support the existing framework of federal, state and local
laws, practices and capabilities that influence current forest
practices, including the ongoing work of federal natural
resource agencies, state forestry agencies, bodies that
administer state water quality BMPs, and nongovernmental
natural resource professionals. This existing framework is well
suited to address local conditions and needs. Federal policies
should also assume that this framework will continue in the 6
long-term and be applied to all forestry practices, whether
associated with traditional or emerging markets.
3. Federal policy should recognize that state and local
resource professionals are best positioned to identify and
address changing resource conditions and emerging needs.--Given
the uniqueness and diversity of forest ecosystems across the
nation, it is extremely problematic to set forest management or
land use standards in a federal policy. Potentially changing
resource conditions and needs are best addressed with a more
tailored approach at the local level by state and local
authorities using existing tools, common forestry practices,
and well-established procedures.
State and local authorities should continue to fulfill their
responsibilities to assess any changing resource conditions
associated with existing or future forest practices, including
the use of biomass to meet federal energy standards, and make a
determination as to whether additional measures are needed to
address emerging needs. If state or local authorities determine
that additional measures are necessary, they should be allowed
to continue the current practice of identifying and taking
necessary corrective measures, following the BMP model that has
proven highly successful across the country in protecting water
quality.
vii. conclusion
NAFO strongly supports our nation's efforts to establish new
sources of renewable energy, and thereby reduce its dependence on
fossil fuels and imported energy. America's working forests can play a
fundamental role in meeting these new and growing energy needs. U.S.
policies should encourage investment in forests as a source of
renewable energy, by establishing non-restrictive definitions of forest
biomass eligible for use in renewable energy programs.
A Federal RES, if adopted, should fully include forest biomass as a
renewable energy source, and ensure that the definition of biomass
encompasses the full range of forest biomass, including trees and other
plants; forest residuals; and wood byproducts including sawdust, bark,
wood chips, and dissolved wood. In addition, Federal policy should
allow state and local authorities to continue their current role in
assessing resource conditions associated with forest management
establishing, where needed, any additional measures that may be needed
to address emerging resource needs associated with the use of forest
biomass for renewable energy production.
Such an approach will enable our country to meet is renewable
energy objectives and allow working forests to make their full
contribution to our nation's renewable energy portfolio while providing
important additional environmental benefits, such as reduced GHG
emissions, clean water, wildlife habitat quality recreation and other
environmental benefits Americans need and enjoy.
Attachment.--White paper
the environmental regulation of private forests in the united states
Private forestry operations are regulated by a fairly complex set
of laws, regulations, and non-regulatory policies at the federal, state
and local level. While the resulting framework is fairly complicated
and can vary widely between jurisdictions, it has been effective in
improving the environmental performance of forestry operations, and can
be expected to do so in the future.
In addition to useful forest products, jobs and economic activity,
working forests provide significant environmental benefits. Watershed
protection, wildlife habitat, carbon dioxide absorption, and other
``environmental services'' are currently provided by private landowners
at little or no cost to society. Whenever policymakers consider new
environmental requirements on private forestry, such as eligibility
requirements for biomass feedstocks intended for energy use, the
implications for the economic viability of working forests should be
considered. If new regulatory requirements reduce the private forest
owner's ability to realize value from a working forest; or if new
market limitations constrain market opportunities for working forests,
private forest owners might be compelled to consider other uses for
their forests, which could result in the reduction of many of the
broader environmental benefits they provide.
background
Private forests are currently regulated at the federal, state, and
local level. The Federal Clean Water Act, Clean Air Act, Endangered
Species Act, Insecticide Fungicide and Rodenticide Act, and the Coastal
Zone Management Act each apply to private forest operations. These laws
have been implemented through a variety of state programs, regulations,
court decisions, agency precedents and policies. More narrowly focused
State forest management regimes, local land use requirements, zoning
and other stipulations have also been used to regulate or manage
forestry operations. Additionally, third party sustainable forestry
programs and a variety of voluntary agreements have also been used to
achieve desired environmental goals.
There is considerable evidence that this complex framework of
regulatory and non-regulatory activities has substantially reduced
adverse environmental impacts from forestry, and will continue to do so
in the future. While this paper will not exhaustively chronicle the
scope of methods available to government at every level to regulate,
manage, encourage or influence activities on private forests, many of
the primary methods are listed here.
the clean water act
The Clean Water Act\1\ is arguably the federal law of predominant
relevance and application. Since forestry operations generally involve
the construction of access roads and water crossings, as well as the
disturbance or removal of trees and plants that would otherwise tend to
control erosion, most of the environmental concerns related to forestry
operations involve the protection of water quality and aquatic habitat.
Forestry operations can also involve the disturbance of plant litter
and soil, the application of herbicides and fertilizers, equipment
lubrication and refueling.
---------------------------------------------------------------------------
\1\ The Federal Water Pollution Control Act of 1972 (Public Law 92-
500), as amended.
---------------------------------------------------------------------------
Under the Clean Water Act, ``point sources'' such as industrial
facilities and wastewater treatment plants with effluents that can be
directly monitored at known outfalls are regulated with a permit system
based on technology-based effluent limitations. Conversely, ``non point
sources'' such as runoff from forests and farms cannot be so easily
monitored, measured or regulated. This is particularly true with
forestry, since forestry activities generally involve numerous
relatively small operations occurring sporadically over large amounts
of space and long periods of time, often by different landowners
operating independently of one another. Complicating the situation is
the fact that different forests, even those in close proximity with one
another, may have vastly different characteristics in terms of
topography, tree species, soil types, wildlife habitat, geology and
hydrology. Consequently, the approach to protecting the environment
from forestry activities must be adapted to local conditions and
circumstances.
Efforts to control non point source pollution from forest
operations have been fairly successful. National Water Quality
Inventories conducted by the Environmental Protection Agency now
contend that ``the most significant source of water quality impairment
to rivers and streams and lakes, ponds, and reservoirs is agriculture,
and the most significant source of impairment to estuaries is municipal
point sources of pollution.''\2\ Other significant sources include
urban runoff, storm sewer discharges, and pollutants deposited from the
atmosphere.\3\
---------------------------------------------------------------------------
\2\ National Management Measures to Control Nonpoint Source
Pollution from Forestry. Page 1-1. EPA-841-B-05-001, United States
Environmental Protection Agency, April 2005. (Emphasis added.)
\3\ Ibid.
---------------------------------------------------------------------------
Although forestry operations create fewer water quality impacts
than agricultural operations, urban runoff and storm water, sewage
plants and natural sources,\4\ major hydrologic events such as 100 year
storms can nevertheless result in significant releases of sediments\5\
when sound forest management practices have not been employed. Although
forest watershed protection efforts began on an ad hoc basis in the
early half of the 20th Century, Section 208 of the Clean Water Act,
adopted in 1972, directed states to develop watershed or regional water
quality management plans to identify significant non point sources and
assess their cumulative effects, and to ``set forth procedures and
methods (including land use requirements) to control to the extent
feasible such sources.''\6\ In 1987, the Clean Water Act was amended to
include, among other provisions, Section 319, requiring states to
develop control plans for any non point source activities that were
causing state waters to fall short of water quality goals. Taken
together, sections 218 and 319 comprise the authority for States to
control non point source pollution, with oversight by EPA.
---------------------------------------------------------------------------
\4\ National Water Quality Inventory: 2002 Report to Congress. EPA
841-R-07-001, United States Environmental Protection Agency, October
2007.
\5\ National Management Measures to Control Nonpoint Source
Pollution from Forestry. EPA-841-B-05-001, United States Environmental
Protection Agency, April 2005.
\6\ Section 208(2)(F)(ii) of the Federal Water Pollution Control
Act of 1972.
---------------------------------------------------------------------------
To control non point source pollution from forestry operations,
most states have adopted Best Management Practices (BMPs) designed to
take regional climate, soils, topography, biota, legal, technical and
socioeconomic factors into account. BMPs vary widely among
jurisdictions, which is understandable since a BMP that is appropriate
for a coastal plain pine forest in Georgia may be wholly inadequate for
a mountainous temperate rainforest in Oregon.
In spite of their variations, there are aspects common to most BMPs
across jurisdictions. The general philosophy of BMPs is to ``avoid,
minimize, and mitigate.'' More specifically, BMPs will generally strive
to 1) minimize soil compaction and the extent of bare soils; 2)
separate exposed soils from surface waters; 3) separate fertilizer and
herbicide applications from surface waters; 4) inhibit hydraulic
connections between bare ground and surface waters; 5) provide forested
buffers around watercourses; and 6) promote stable roads and
watercourse crossings.\7\
---------------------------------------------------------------------------
\7\ Olszewski, R. and C.R. Jackson. 2006. Best management practices
and water quality. In A primer on the top ten forest environmental and
sustainability issues in the southern United States. NCASI Special
Report No. 06-06. Research Triangle Park, NC: National Council for Air
and Stream Improvement, Inc.
---------------------------------------------------------------------------
Different states manage BMPs in different ways. Some states employ
mandatory BMPs administered by State Foresters under a focused state
forest practices act. Other states employ non-regulatory BMPs developed
or approved by state agencies, with landowner education to encourage
compliance, and authority for agencies to take action against
landowners who do not comply. Regardless of the approach, BMPs and the
broader non point source pollution prevention programs implemented by
the states are subject to EPA oversight and approval. States whose
water quality inventories fail to show continued improvement invite
closer scrutiny and review by the EPA, and poor performance can result
in grant funding reductions or a federal takeover of the state program.
Over time, BMPs have become an accepted, well understood, widely
adopted method of protecting water quality in the waters of the United
States.
Although it is beyond dispute that BMPs are widely stipulated, it
is appropriate to consider 1) how effective they are in protecting
water resources and other environmental values, 2) what the compliance
rates are for BMP implementation, and 3) the factors associated with
high rates of implementation and compliance.
There is a high correlation between high water quality and forested
areas. Most of the waters failing to meet EPA-approved water quality
standards and requiring the establishment of Total Maximum Daily Load
(TMDL) specifications are in urban or industrial areas. But this
correlation alone does not prove the effectiveness of BMPs.
Fortunately, a variety of watershed scale research projects in the
published literature have evaluated the effectiveness of BMPs in the
United States. These studies, some of which are summarized by Stednick
and Ice,\8\ have found BMPs to be highly effective when they are used.
Other studies point out that the major impediment to the protecting
water quality is the lack of compliance with BMPs.\9\
---------------------------------------------------------------------------
\8\ Ice, G.G.; Stednick, J.D. (eds). 2004. A Century of Forest and
Wildland Watershed Lessons. Bethesda, MD, USA: Society of American
Foresters. 292 p.
\9\ Ice, G.G.; Stewart, G.W.; Waide, J.B.; Irland, L.C.; Ellefson,
P.V; July, 2007. 25 Years of the Clean Water Act: How Clean are Forest
Practices? Journal of Forestry. Pages 9-13.
---------------------------------------------------------------------------
A more expansive treatment of this subject is contained in a
technical paper currently in draft\10\ by the National Council for Air
and Stream Improvement (NCASI), soon to be published as a NCASI
Technical Bulletin. Some of its key points are as follows:
---------------------------------------------------------------------------
\10\ National Council for Air and Stream Improvement, Inc. (NCASI).
2008. Compendium of state and provincial forestry best management
practices. Technical Bulletin or Special Report In Draft. Research
Triangle Park, N.C.: National Council for Air and Stream Improvement,
Inc.
Forestry BMP prescriptions vary among jurisdictions due to a
multitude of factors, but properly implemented BMPs are
effective regardless of jurisdictional requirements;
While monitoring programs and protocols vary among
jurisdictions, rates of BMP implementation are generally very
high.
Jurisdictions having long-term monitoring programs in place
have shown steady improvement in compliance rates over time.
Forest certification programs, along with education and
outreach programs, have had a positive and significant role in
increasing BMP compliance with the various jurisdictional
recommendations and/or recommendations.
This last point is particularly important. According to NCASI, the
high rates of BMP compliance reported for industrially managed
forestlands ``are primarily attributable to sustainable forestry
programs'' such as the Sustainable Forestry Initiative (SFI), the
Forestry Stewardship Council (FSC), and the American Tree Farm program.
NCASI contends that these third party verification programs have been
documented to result in higher compliance rates with BMPs.
BMPs have become, therefore, effective tools to advance the goals
of the Federal Clean Water Act. As a consequence of this success, BMPs
are increasingly being used to address ancillary issues such as
wildlife habitat and other issues, some of which fall under the
cognizance of other federal laws.
the endangered species act
The Endangered Species Act\11\ (ESA) applies to private forestry
operations as a direct federal regulatory program which relies mainly
on prohibitions against the ``taking'' of listed threatened or
endangered plant and animal species. About 1,320 species in the United
States and U.S. waters have been listed as threatened or
endangered,\12\ many of which spend at least part of their life cycle
in forests or waters affected by forestry activities.
---------------------------------------------------------------------------
\11\ 7 U.S.C.136; 16 U.S.C.460 et seq.
\12\ 12See http://www.nmfs.noaa.gov/pr/species/esa/
---------------------------------------------------------------------------
Although the ESA does not enlist the support of States or state
programs in ways comparable to other federal environmental laws, States
and localities have amended their laws, regulations, land use plans,
policies and BMPs to help protect ESA-listed species and their
habitats. In addition, some private landholders have entered into
habitat conservation plans (HCPs) designed to improve habitat for
listed species, although HCPs have often proven to be costly, difficult
and time-consuming to negotiate.
Still other private landholders have been encouraged by the ESA to
engage in land sales and exchanges to bring important habitat into
conservation easements, non-profit ownership, or public ownership.
the clean air act
The Clean Air Act\13\ directs the Environmental Protection Agency
to establish air quality standards protective of public health and
welfare. States, in turn, develop plans and programs to achieve those
standards. The direct impact of these plans and programs on forest
management activities is to limit slash burning and prescribed fires.
Indirect impacts include the demand for fuel wood in homes and other
facilities. Finally, the motor vehicles and equipment used in forestry
must be compliant with all applicable air quality standards.
---------------------------------------------------------------------------
\13\ The Clean Air Act (42 U.S.C. 7401-7626) consists of Public Law
159 (July 14, 1955; 69 Stat.322) and the amendments made by subsequent
enactments.
---------------------------------------------------------------------------
the federal insecticide, fungicide and rodenticide act (fifra)
The Federal Insecticide, Fungicide and Rodenticide Act,\14\ or
FIFRA, establishes comprehensive programs regulating use of pesticides
in forestry, agriculture and other situations. Under its provisions,
pesticide compounds must be ``registered'' with (approved by) EPA for
specific purposes and used only in accordance with EPA-approved
``label'' instructions designed to protect environmental resources.
Pesticides which could pose environmental or health hazards if
improperly handled or used by untrained people are restricted so they
can be purchased and applied only by applicators trained and licensed
by state agencies under EPA-approved programs.
---------------------------------------------------------------------------
\14\ 7 U.S.C. 136 et seq.
---------------------------------------------------------------------------
Although FIFRA is applicable to private forest lands, the forestry
market for pesticides is relatively small compared to agricultural and
urban markets. Because trees grow for long periods compared to food and
forage crops, forest-use pesticides usually are applied on particular
lands only rarely (e.g. when establishing new plantations or responding
to rare pest infestations), in contrast to agriculture, urban lawns,
golf courses and other areas where the same chemicals are applied more
often. It is not surprising, therefore, that environmental damage from
forest-use pesticides has not been documented in the legal or
scientific literature as a significant problem.
coastal zone management act
Unlike the Clean Water Act, Endangered Species Act, Clean Air Act,
and Federal Insecticide, Fungicide and Rodenticide Act, the Coastal
Zone Management Act\15\ directly addresses broader land use issues
rather than narrower environmental concerns. Twenty-nine states
bordering on the West, East and Gulf Coasts, Pacific Ocean or Great
Lakes participate in voluntary federal-state partnerships under the
CZMA,\16\ including most major private timber producing states.\17\
These CZMA programs are developed with technical assistance and funding
from, and then subject to approval of, the National Oceanographic and
Atmospheric Administration (NOAA) through its Office of Ocean and
Coastal Resource Management (OCRM). They address a wide range of issues
including coastal development, water quality, shoreline erosion, public
access, natural resource protection, energy facility siting, and
coastal hazards such as hurricanes and flooding.\18\ Other states also
address these issues through land use planning laws, local zoning
ordinances, etc. Summaries of NOAA-approved CZMA programs are available
through a NOAA website.\19\
---------------------------------------------------------------------------
\15\ Public Law 92-583, 16 U.S.C.1451-1456, as amended.
\16\ See http://coastalmanagement.noaa.gov/mystate/welcome.html , a
NOAA website containing a map of participating and eligible states and
territories. Illinois is the only eligible state currently not
participating.
\17\ Except Montana, Arkansas, Tennessee, West Virginia and New
Hampshire.
\18\ See http://oceanservice.noaa.gov/topics/coasts/management/
\19\ At http://coastalmanagement.noaa.gov/mystate/welcome.html.
Click on the map to bring up a summary for a particular state.
---------------------------------------------------------------------------
An important component of CZMA programs is the Coastal Nonpoint
Pollution Control Program under which states and territories with
approved coastal zone management programs must develop and implement
programs to control nonpoint source pollution from six main sources
including forestry and losses of wetland and riparian areas.\20\
Understandably, there are considerable variations among the states on
how forestry issues are addressed in CZMA programs, reflecting
differences in state constitutions, agency roles, court decisions,
political and economic factors and environmental conditions.
---------------------------------------------------------------------------
\20\ CZMA Sec. 3217; see also http://coastalmanagement.noaa.gov/
programs/coast--div.html
---------------------------------------------------------------------------
state forestry and land use programs
States have adopted a wide variety of regulatory and non-regulatory
programs addressing forest-related environmental and land use issues.
Generally these are incorporated into federally approved programs under
the federal statutes listed above, but many deal with other forestry
issues as well. All 50 states have a State Forester, who is responsible
for administering forestry programs and coordinating regulatory and
non-regulatory programs administered by his department and other
agencies.\21\
---------------------------------------------------------------------------
\21\ See National Association of State Foresters website, http://
www.stateforesters.org/
---------------------------------------------------------------------------
Some states have forest practices acts regulating all or most
forest management activities. Some require reforestation after timber
harvests. Some require local government approval to convert forestlands
to non-forest uses. Some provide various kinds of tax incentives to
encourage forest owners to keep their lands in forests. All states
provide landowner education and technical assistance delivered by State
Foresters, land grant colleges and universities, and other
institutions, often with federal funding through the by U.S. Forest
Service state and private forestry programs and Natural Resources
Conservation Service extension service programs.
Some states have struggled to contend with stakeholders who wish to
see stricter regulation of forestry activities, notwithstanding the
nearly universal view that greater environmental benefits result when
forest owners keep their lands in forests rather than convert them to
other uses. If forest owners encounter environmental regulations or
environmental litigation risks that make forest management uneconomic,
many are often compelled to consider alternative ways to obtain
economic returns from their property. The problem is compounded by the
fact that most forestry investments are ``sunk'' at or near the
beginning of a forest stand rotation while most of the economic return
is received decades later when the stand is harvested. Therefore,
willingness to invest in new forest stands can depend on perceptions
about whether harvest will be allowed decades later and what costs
might be imposed by regulatory programs at that time. Many states have
addressed this dilemma by trying to keep both administrative
``transaction'' costs and operational costs of forest regulation
reasonable, relying on landowner education and voluntary cooperation as
much as possible, providing technical assistance on forestry issues,
favorable tax treatment for forestlands and forestry activities, and
other incentives to encourage owners to increase forestry investments
and keep lands in forest use. This incentive-based approach has
sometimes been criticized by those seeking more regulatory mechanisms,
but overall it seems to have produced good results: The amounts of
forestland have been gradually increasing in most states for about 90
years as forests have grown back on former farmlands and pasture lands
at faster rates than forestlands have been lost to urban development
and other non-forest uses. For example, in some New England states land
uses have shifted from about 80% agriculture to about 80% forests over
the last 100 years or so. Similarly in southern states many lands
formerly used for grazing, tobacco, cotton or other agricultural uses
have returned to forests. In most regions the volumes of standing
timber and other biomass have been increasing and could increase
further if landowners could be induced to increase forestry investments
to enhance timber growth and thus increase their forestry-based
economic returns.
voluntary cooperative activities
In addition to the regulatory and non regulatory approaches listed
above, some innovative cooperative projects between private landowners,
states, and private foundations have resulted in the protection of
critically important natural ecosystems and the interests of private
landowners and other stakeholders. Here are a few recent notable
examples:
In 2007, the Nature Conservancy, the Lyme Timber Company,
Conservation Forestry LLC and the State of Tennessee completed
the largest conservation transaction in Tennessee since the
creation of the Great Smoky Mountains National Park in the
1930s, protecting nearly 130,000 acres of hardwood forests,
mountains and streams on the Cumberland Plateau, through a
combination of working forest agreements, conservation
easements, and land purchases.
In 2008, Plum Creek Timber Company and King County,
Washington entered into an agreement to protect the Green River
Watershed by granting the county a conservation easement at no
cost to the taxpayer, in exchange for Development Credits that
allowed for increased development density in urban areas.
In 2007, Forest Capital Partners signed an agreement with
the Minnesota Department of Natural Resources that will
restrict development on more than 51,000 acres of their
privately owned forestland in Itasca and Koochiching counties
in Minnesota. State and private money was used to purchase a
working forest conservation easement from Forest Capital
Partners, the largest single transaction for conservation in
three decades in Minnesota. The terms of the conservation
easement, which is in perpetuity, guarantees public access for
outdoor recreation, ensures sustainable forest management, and
conserves wildlife habitat.
In 2001, the Pingree family forest ownership in Maine, in
partnership with the New England Forestry Foundation, created
the world's largest conservation easement (764,000 acres)
designed to maintain this land in an undeveloped condition
while promoting continued use of the acreage as a working
forest.
These kinds of creative arrangements--employed alongside the
methods already available to the federal, state and local governments
to regulate, manage, or influence activities on private forests through
direct regulation, regulatory and non-regulatory BMPs, land use
planning, and incentive arrangements--constitute a rich set of tools
that can be used in pursuit of national goals, while remaining
responsive to local needs and interests.
will an increased demand for energy biomass require changes in forest
management regulation?
As a result of the growing dependence of the United States of
foreign oil and the desire to increase the supply of renewable energy
sources, working forests have been increasingly viewed as an important
potential source of wood and biomass for conversion into electricity or
liquid fuels such as cellulosic ethanol. Some have expressed concern
that a ``biomass boom'' might result in the wholesale conversion of
working forests into plantations of short rotation woody crops for the
exclusive purpose of energy production, resulting in a loss of wood
supply for saw logs, wood chips for pulp, or other forest products.
Still others have expressed concerns that such a conversion might
result in a loss of some of the environmental benefits that working
forests provide.
It is important to note the forest products industry is already a
major producer and user of renewable electricity, and that biomass
already produces roughly 53% of the nation's non-hydro renewable
electricity.\22\ Forest landowners have harvested biomass for energy in
some locations for more than 20 years. In many instances, forest
management that includes biomass harvesting has been included in BMP
audits and third party certification programs.
---------------------------------------------------------------------------
\22\ U.S. EIA at www.eia.doe.gov/cneaf/alternate/page/
renew_energy_consump/table3.html--Biomass is the primary energy source
for 55.4 billion kilowatt hours of the 103 billion kilowatt hours of
non-hydro renewable energy produced in 2007 (preliminary figures,
subject to revision).
---------------------------------------------------------------------------
Market history also suggests that wholesale conversion of working
forests to dedicated energy crops is unlikely, since biomass intended
to be used as an energy feedstock generally has a lower market value
than other forest products. While wholesale conversion may be a valid
concern in the case of ``row crop'' agriculture, where native
grasslands, lands set aside for conservation purposes, or lands in food
production might be converted to dedicated energy crops, such is not
the case for working forests where energy biomass removals are likely
to be in addition to, not in lieu of, the existing production of higher
value products.
But there probably are opportunities for working forests to be
managed, in the pursuit of higher value products, to produce increasing
amounts of biomass for renewable energy production. To ensure that soil
productivity, wildlife habitat, or other values are not compromised by
the removal of additional material that would otherwise be left in the
forest without an ancillary market for biomass energy feedstocks, some
states are exploring approaches to revise existing BMPs, or to
establish new guidelines in addition to existing BMPs, to guide in the
harvest of biomass for large scale energy. Because BMPs or the
development of other BMP-like guidelines can take local factors into
account, it seems prudent that enhancements or adjustments to state
practices and guidelines be considered without federal interference,
particularly as we gain a greater understanding of how biomass
conversion technologies and markets will actually evolve.
With respect to the other potential impacts of increased forest
biomass utilization for energy on air and water quality, wildlife
habitat, and pesticide use, it is difficult to speculate beyond broad
generalizations. However, the removal of additional biomass could be
beneficial to air quality to the extent that it reduces the need for
prescribed burns, lowers the risk of catastrophic wildfire or displaces
fossil fuels as an energy source. Water quality would arguably be
unchanged, since the largest factor in non-point source pollution
associated with forest operations involves the construction and
placement of roads, and biomass collection would likely occur using the
same roads and access points used for the higher value product
harvests. Increased use of wood for renewable electric power generation
is unlikely to occur to the detriment of ESA-listed species since most
wood-based biofuels have been and probably will continue to be
byproducts of timber harvests conducted primarily for production of
lumber, pulp, paper and other traditional forest products. Increased
use of wood for renewable energy could contribute to increased
pesticide use in some intensively managed plantations, mainly at the
time new crops are being established. However, healthy fast-growing
intensively managed timber crops are seldom subject to the kinds of
insect and disease problems that sometimes require use of insecticides
in ``overmature'' timber stands or other stands containing large
amounts of dead, dying or damaged trees that attract forest pests.
Therefore increased use of wood-based biomass seems unlikely to
generate widespread pesticide problems or increased use of pesticides
in the forestry sector.
conclusion
A robust yet flexible array of tools, in the form of federal, state
and local laws, regulations, programs and Best Management Practices
have measurably improved the environmental performance of forest
operations in the United States. In addition, voluntary activities and
third party sustainability programs have worked to promote
environmental goals without sacrificing jobs and economic activity. As
policymakers consider the imposition of new environmental requirements
on private working forests, or market limitations on the participation
of private working forests in emerging renewable energy markets, the
implications for the economic viability of working forests must be
considered to avoid inviting an unintended result--compelling private
forest owners to consider alternative uses for working forests that do
not provide the environmental services that provide healthy watersheds,
wildlife habitat, carbon sequestration and similar benefits that are
highly valued by society.
______
Statement of the American Forest & Paper Association (AF&PA)
introduction
The American Forest & Paper Association (AF&PA) appreciates this
opportunity to comment on the proposal to implement a national
Renewable Electricity Standard (RES).
AF&PA is the national trade association of the forest products
industry, representing pulp, paper, packaging and wood products
manufacturers, and forest landowners. Our companies make products
essential for everyday life from renewable and recyclable resources
that sustain the environment. The forest products industry accounts for
approximately 6 percent of the total U.S. manufacturing GDP, putting it
on par with the automotive a nd plastics industries. Industry companies
produce $200 billion in products annually and employ more than 1
million people earning $54 billion in annual payroll. The industry is
among the top 10 manufacturing sector employers in 48 states.
The forest products industry is the leading producer and user of
renewable biomass energy. In fact, the energy we produce from biomass
exceeds the total energy produced from solar, wind, and geothermal
sources combined. Sixty-five percent of the energy used at AF&PA member
paper and wood products facilities is generated from carbon-neutral
renewable biomass. The industry also is a leader in highly efficient
cogeneration of electric power, much of it from biomass, both for
internal use and for sale to the power grid.
Since 1995, all AF&PA members must subscribe to the principles of
the Sustainable Forestry Initiative (SFI), an independent forest
certification system with rigorous standards that are developed by a
multi-stakeholder board representing conservation groups and research
organizations as well as forest landowners and manufacturers. With over
226 program participants and 156 million acres of certified well
managed forests, the SFI program demonstrates that America's forest
and paper companies are committed to sustainable forest management. Our
historic commitment to renewable energy and sustainable forest
management demonstrates that a balance between the two is both possible
and necessary.
af&pa position
While AF&PA supports the goals of a Renewable Electricity Standard
(RES), we oppose a federal RES that does not provide equal treatment to
the forest products industry's existing renewable energy generation
with new generation, applies a onesize-fits-all approach, and which
would burden the industry with increased costs for energy and its raw
materials.
In order to potentially address some of these concerns, if a
federal RES is enacted, it should:
Treat Energy from Existing and New Facilities Equally
The forest products industry is an unmatched leader when it comes
to the generation of renewable biomass energy, and meets an average of
65 percent of its energy needs from carbon-neutral renewable biomass.
Any RES should recognize this leadership and investment by treating
biomass-based electricity from existing industry facilities equally
with electricity from new facilities. There are currently 35 states
(including the District of Colombia) that have RES mandates or goals.
Twenty-five of them allow power from existing facilities to qualify. As
discussed below, an RES should acknowledge and promote the leadership
of the states in making their determinations of qualifying power and
also allow power from existing facilities to qualify.
The committee's proposed RES legislation would not provide
tradeable credits for the renewable electricity generated by our
manufacturing facilities. AF&PA believes the RES should be amended to
fully recognize the renewable, carbon-neutral power generated by our
manufacturing facilities, as it displaces fossil-fuel and helps to
achieve the objectives of the RES.
As the demand for biomass-based power increases, AF&PA member
facilities must compete with new market entrants for that biomass--the
raw material for their products, as well as the source of their own
renewable, carbon-neutral power. The ability of new market entrants'
electricity to qualify for, and generate revenue from, renewable energy
credits (RECs), while existing facilities' biomass-based electricity
does not qualify, puts existing facilities at a serious competitive
disadvantage.
Moreover, utilities complying with an RES typically are able to
pass through their compliance costs in the form of a state public
utilities commission approved rate increases to their customers
(including AF&PA members, who are large ratepayers). Accordingly,
regulated utilities can pay more for the wood biomass they purchase. In
contrast, the forest products industry operates in a highly competitive
global market in which manufacturers cannot pass on higher raw material
and energy costs to consumers and still remain competitive.
Forest products manufacturing facilities are major customers of
utilities. No one benefits if a policy compels those customers to
compete against their energy suppliers on a playing field that is so
uneven that the customers' survival is jeopardized. Since 2006, the
housing crisis and the economic downturn have brought about the loss of
15 percent of the industry's workforce--about 190,000 jobs. These jobs
are critical for the survival of the rural communities where our
facilities often are located.
Finally, AF&PA supports provisions allowing energy efficiency to
qualify as a resource to help a utility qualify under the RES. The
proposed percentages of renewable power are extremely ambitious, and
every source of possible clean energy will be needed to achieve the RES
goals. The bill allows states to petition for energy efficiency (such
as electricity savings from combined heat and power) to meet a portion
of RES mandate. However, the bill only allows the output of a new
combined heat and power system to qualify for energy efficiency
credits, thereby putting our existing combined heat and power systems
at a disadvantage as compared to new facilities.
Provide Incentives for Reliable and Affordable Regional Fiber Supplies
and Promote Sustainable Forest Management
Renewable energy and climate change policies are projected to
substantially increase demand on wood biomass as a source of bioenergy.
Projections released by the Energy Information Administration (EIA) in
December of 2008 indicate that biomassbased power generation by the
electric power sector will increase from 10.4 billion kWh in 2007 to
133.6 billion kWh in 2025.
Wood is a renewable resource that differs from wind and solar power
in that is has other uses and demands from existing sources. The
combined impacts of the federal RES, state RES programs, the existing
Renewable Fuel Standard, the cellulosic ethanol production tax credit,
climate change policies, and Federal government support for new
facilities to process wood biomass into energy have created concerns
about the reliability and availability of fiber supplies in certain
regions of the country.
Without efforts to increase overall biomass supply, the increase in
demand for wood biomass for electricity will likely have unintended
consequences on forest products manufacturing facilities that rely on
woody biomass as their key raw material and energy source. While
intensified management and research can increase forest productivity,
incentives should be provided for programs that promote the planting of
biomass feedstocks, including trees and short rotation woody crops, on
farm lands, planted forestlands or degraded forestlands, and investment
in biomass collection. In addition, biomass from Federal public lands
should also be included as eligible biomass. Increasing the supply of
biomass can help prevent displacement of existing manufacturing-based
green jobs in rural communities.
Recognize State Leadership in Renewable Energy
As stated above, thirty-five states (including Washington, D.C.),
have proactively adopted RES mandates or goals. Each state RES program
is the result of the state's legislative process, ballot initiative or
executive order and is carefully tailored to maximize efficiency and
minimize cost, based on local political realities, economic conditions
and resource availability. Imposition of a federal RES that does not
recognize these program standards could unnecessarily increase costs
and impose needless economic hardship that state programs are designed
to avoid and thereby undermine public support for RES programs.
State RES programs include critical provisions on definitions of
qualifying resources and the required percentages of renewable energy
and their associated deadlines, among others. A federal RES should not
require states to revise their programs to be consistent with the
federal program. This would require the unnecessary expenditure of
resources to reconfigure programs already achieving progress on
renewable energy, severely disrupting program implementation and
hindering achievement of their goals.
Any federal legislation should ensure that investments made and
progress realized under any state RES programs are preserved and
permitted to qualify on a goingforward basis. We appreciate the
provisions in the bill that attempt to harmonize the federal and state
programs, but it does not appear those provisions achieve this goal.
The states should be provided with mechanism, similar to that in
the Renewable Fuels Standard (RFS), which would allow a state to obtain
a waiver from the RES if the Secretary of Energy makes certain
determinations regarding economic or environmental impacts of RES
implementation or the adequacy of the supply of renewable energy in the
state or region.
AF&PA appreciates the opportunity to offer our views on the
proposed federal Renewable Electricity Standard. We look forward to
working with the committee in coming weeks to address the issues raised
in our statement.
______
Free Flow Power,
Gloucester, MA, February 10, 2009.
Hon. Jeff Bingaman,
Chairman,
Hon. Lisa Murkowski,
Ranking Member, Senate Energy and Natural Resources Committee, 304
Dirksen Senate Building, Washington, DC.
Dear Chairman Bingaman, Ranking Member Murkowski, and Members of
the Committee: Free Flow Power Corporation (FFP) is pleased to present
these comments for the record of the Committee's Hearing on the
Renewable Electricity Standard (RES). FFP applauds the Committee for
advancing the discussion of a national RES, which FFP wholeheartedly
supports. If enacted, the majority staff draft circulated by the
Committee would be a landmark step in the development of the United
States' renewable energy economy. However, without amendment of the
term ``ocean energy'' in Section 610(a)(8) of the draft, the RES
legislation would inadvertently exclude hydrokinetic energy generated
from rivers, this country's best hydrokinetic resource. By amending the
term to ``marine and hydrokinetic renewable energy,'' as defined in the
Tax Code (26 U.S.C. Sec. 45), the Committee will ensure that all
potential sources of clean, renewable energy are recognized.
FFP is a renewable energy company focused on hydrokinetic
generation. Hydrokinetic generation uses tides, currents, waves, and
free flowing rivers to produce electricity without building dams or
diversions. FFP has developed a suite of proprietary turbine generator
technologies and is obtaining regulatory approvals to develop over 100
hydrokinetic sites on the Mississippi, Missouri, and Ohio Rivers. FFP
has offices in Massachusetts, Louisiana, and Washington and is
developing projects in the states of Louisiana, Mississippi, Arkansas,
Tennessee, Kentucky, Missouri, Illinois, and Indiana.
Globally, the hydrokinetic energy developers have focused primarily
on ocean tides and currents, and the language of the draft RES bill
reflects this attention. However, areas of high tidal energy are less
plentiful in the United States than in other areas of the world, such
as the British Isles, where several leading hydrokinetic companies are
currently based. FFP is committed to developing its business in the
United States and therefore has focused on in-stream hydrokinetics,
harnessing the flows of America's rivers. Detailed analysis of over
80,000 potential hydrokinetic sites in the United States led FFP to
concentrate on the Mississippi River Basin, which drains 40% of the
continent and is the third largest river system in the world.
FFP is convinced that developing hydrokinetic sites in rivers
provides a faster path to commercialization than starting with oceans,
due to several advantages for river-based deployment. Fresh water is
less corrosive and less susceptible to bio-fouling than salt water.
River sites are generally closer to end users of electricity than ocean
sites, dramatically reducing the costs associated with expensive
underwater cabling. The uni-directional flows found in rivers are much
easier to engineer than bi-directional tidal flows, which range from
zero to maximum capacity. The environmental issues in rivers have been
studied extensively over time and are much better understood than ocean
environments. The Mississippi River is an especially strong
hydrokinetic resource because, unlike the other major river systems in
the world, the energy of the Mississippi is focused through a fixed
channel and levee system rather than being allowed to dissipate across
a flood plain.
FFP supports the development of wind, solar, and other renewable
energy resources, all of which are essential to building a diversified
renewable energy portfolio. FFP believes that development of
hydrokinetic energy in rivers in the United States must also be a
component of a diverse renewable energy portfolio that includes wind,
solar, and other renewable energy resources. Hydrokinetic energy
generation requires no building of dams or diversions, eliminating the
environmental concerns that have caused the decline in conventional
hydropower generation over the past half-century. The advantages of
hydrokinetic generation are many Hydrokinetic energy facilities are
ideal in areas where wind and solar resources are marginal, such as the
Mississippi River Basin. Hydrokinetic sites are located primarily
underwater and therefore have less visual impact than wind or solar.
Hydrokinetic energy provides reliable energy output that can be
predicted with precision days or weeks in advance. FFP believes that it
can develop most of its hydrokinetic projects at a capital cost that is
competitive with coal and less expensive than many other renewable
energy resources, while creating robust operations and maintenance
businesses that will employ thousands of American workers in jobs close
to their homes.
FFP supports the inclusion of hydrokinetic energy resources in the
draft RES bill and strongly urges the Commission to amend the language
``ocean energy'' at Section 610(a)(8) to include all categories of
hydrokinetic resources, including river-based projects. FFP recommends
implementation of the comprehensive term ``marine and hydrokinetic
energy,'' which was passed by the Senate and House in the American
Economic Stabilization Act of 2008 (H.R. 1424) last summer. ``Marine
and hydrokinetic renewable energy'' is defined in the Tax Code, 26
U.S.C. Sec. 45, as follows:
(A) In General.--The term ``marine and hydrokinetic renewable
energy'' means energy derived from----
(i) waves, tides, and currents in oceans, estuaries,
and tidal areas,
(ii) free flowing water in rivers, lakes, and
streams,
(iii) free flowing water in an irrigation system,
canal, or other man-made channel, including projects
that utilize non-mechanical structures to accelerate
the flow of water for electric power production
purposes, or
(iv) differentials in ocean temperature (ocean
thermal energy conversion).
(B) Exceptions.--Such term shall not include any energy which
is derived from any source which utilizes a dam, diversionary
structure (except as provided in subparagraph (A)(iii)), or
impoundment for electric power production purposes.
Adoption of the term ``marine and hydrokinetic renewable energy''
will ensure that clean, renewable energy that is generated from the
United States' best hydrokinetic resource--its rivers--will be
available to satisfy the requirements of the national RES. The
availability of all sources of hydrokinetic energy is essential to
ensure equality for electricity consumers in states without ocean
resources or other viable sources of renewable energy.
Thank you for your consideration of these comments.
Respectfully submitted,
Daniel R. Irvin,
President and CEO.
______
State of New Jersey,
Board of Public Utilities,
Newark, NJ, February 9, 2009.
Hon. Jeff Bingaman,
Chairman, Senate Energy and Natural Resources Committee, 304 Dirksen
Senate Building, Washington, DC 20510.
Re: Comments on Proposed 2009 RES Legislation
Dear Chairman Bingaman: The New Jersey Board of Public Utilities
(BPU) respectfully submits written testimony on the Democratic staff
draft for Chairman Bingaman's Renewable Electricity Standard in the
context of the U.S. Senate Energy and Natural Resource Committee
hearing being held on Tuesday, February 10, 2009. We applaud your
commitment to establish a federal Renewable Energy Standard (RES) and
the goals reflected in the recent draft RPS legislation released by
Senator Bingaman (January, 2009 Discussion Draft). We also appreciate
your concern about the potential impact that a federal RES may have on
the 29 existing State Renewable Portfolio Standards (RPS). We would
like to take this opportunity to comment on a few key issues, critical
to the effective interaction between state RPS programs and a new
federal RES.
New Jersey was one of the first States in the nation to implement
an RPS and is widely recognized for its effective rules and standards
that have helped advance renewable energy markets. Governor Corzine
recently announced plans to increase New Jersey's RPS from 22.5%
Renewable Energy by 2020 to 30% renewable energy by 2020--a goal that
exceeds the proposed federal RES. In the year ending May 31, 2008, over
2.3 million MWhs of Class I Renewable Energy was generated to meet New
Jersey's RPS which represents approximately $23 million in renewable
energy certificate (REC) sales, supporting countless jobs and economic
benefits for the State and region.
Early movers like New Jersey have served as a laboratory of
effective market design that have helped states and governments develop
renewable energy programs that work across regions, electric grids and
electric power markets. New Jersey was one of the first States to adopt
the use of RECs to demonstrate compliance with our State RPS and
provide market-based incentives to renewable energy generators based on
REC value. As part of this initiative New Jersey also help finance and
establish the PJM-Generator Attribute Tracking System (GATs) to track
and verify RECs. While we are excited by the opportunity that a federal
RES represents in terms of market growth and additional stimulus, we
are also deeply concerned that a federal RES could significantly
disrupt renewable energy markets in states like New Jersey and REC
markets in particular. The enclosed document ``Observations on State
and Federal Interaction with respect to Renewable Portfolio
Standards'', January, 2009, developed by Clean Energy States Alliance
(CESA), a multi-state RPS collaborative, provides more detailed
recommendations that we hope you will consider as you advance federal
RES legislation. Of particular concern to New Jersey however, are the
following issues regarding the appropriate and effective interaction
between state and federal RPS programs which we would like to bring to
your attention:
1. State Preemption.--While the current draft legislation
explicitly disavows state preemption, the language is general
and other provisions of the bill could frustrate the ability of
states to achieve higher targets such as those set by New
Jersey. A federal RPS should contain comprehensive language to
prevent both express and implied preemption of the existing
state RPS laws and explicitly allow states to enact RPS
requirements that differ from the federal requirement,
particularly resource specific requirements such as a carve-
out, set-aside or a multiplier. Resource specific carve-outs
and multipliers, such as New Jersey's solar set aside, have
been critical to the growth of important renewable energy
resources, such as solar technology and customer-sited
resources, that can not at present compete against the lowest
cost resources or that face other market barriers. However,
these higher cost renewables provide substantial public and
energy values, and will experience significant future cost
reductions as markets mature with the assistance of RPS
programs across the country. A federal RES should also require
that any renewable energy credits used to meet a state RPS that
are in excess of the federal requirement must be retired rather
than sold to utilities in other states or banked for future
federal compliance. A federal RES should also prohibit state-
specific RECs that do not meet the federal RPS from use for
federal compliance.
2. REC Tracking System Integration.--The proposed legislation
appears to envision a separate federal REC tracking system that
operates in parallel to state or regional REC systems. This
dual REC system could add considerable complexity, cause
problems with clear title and existing contracts, and risk
potential double counting thus undermining New Jersey and other
state REC markets. We strongly recommend that a federal RES
rely on the network of existing and emerging state or regional
tracking systems, such as PJM-GATs, to issue, track and retire
renewable energy credits and energy efficiency credits. PJM is
the Independent System Operator (ISO) that coordinates and
directs the operation of the region's transmission grid;
administers a competitive wholesale electricity market, the
world's largest; and plans regional transmission expansion
improvements to maintain grid reliability and relieve
congestion.--PJM-GATs, which was launched in September 2005,
tracks and verifies RECs within the PJM Interconnection control
area serving 51 million people in all or parts of Delaware,
Indiana, Illinois, Kentucky, Maryland, Michigan, New Jersey,
North Carolina, Ohio, Pennsylvania, Tennessee, Virginia, West
Virginia and the District of Columbia. PJM-GATS was established
in response to the needs of state regulatory commissions, other
state agencies and market participants for a single, regional,
integrated system to implement stateimposed fuel mix and
emissions disclosure requirements and renewable portfolio
standards. The states and PJM Interconnection market
participants believe this integrated system is the most cost-
effective approach to serve the public policy and regulatory
needs. It provides the greatest accuracy and efficient tracking
of the ownership of the attributes.
We believe that a federal RPS tracking system should be
required to consult with and rely on such existing tracking
systems. The federal RES should also require DOE to reinforce
minimum design and operational requirements to support a fully
functional national credit trading market for renewable energy
credits and energy efficiency credits. Where tracking
capability does not exist, the DOE through the federal RES, can
create, or delegate authority to create, one or more regional
tracking systems.
3. National REC Definition.--While the proposed legislation
defines what resources are eligible for receiving federal RECs,
it does not define clearly what a REC and its associated
attributes are. Federal legislation should provide a simple,
standard definition for RECs that can lay the foundation for
well coordinated markets. RECs will be fungible for national
RES compliance and support a liquid market only if they have a
clear and common definition. A federal RES should use the most
universal definition of a REC, based on a unit of production,
i.e. 1 MWh = 1 REC, with no derived attributes such as emission
credits or allowances. States should also be allowed to retain
specific authority to determine how and under what conditions
electricity suppliers may purchase, transfer, trade, or retire
any RECs or environmental attributes associated with renewable
generation used to meet a state RPS.
4. Alternative Compliance Payments.--Most federal RES
proposals have included an alternative compliance payment
mechanism (ACP). Because state ACP and noncompliance penalties
are so diverse, we recommend that state ACP/penalties do not
count towards the federal RES. Because state use of ACP/penalty
payments cannot be readily or directly linked to actual
renewable generation, counting state ACP or penalty payments
towards a federal RPS is not practical. In our view, all
options that provide federal compliance credit for state ACP/
penalties are problematic, regardless of design.
The proposed legislation also states that revenue from
alternative compliance payments and penalties under the federal
RPS should be granted to state agencies responsible for
developing state energy conservation programs (i.e., state
energy offices) to be used for energy conservation and
renewable energy development. The bill provides funding
preference for those states which have limited renewable energy
capacity and for state programs that promote ``innovative''
renewable energy technologies. New Jersey is one of more than
20 states who administer a renewable energy fund that has
proven highly effective in support of renewable energy project
deployment and energy efficiency programs, with funding coming
in part from state RPS alternative compliance payments. We
strongly recommend that revenues generated by any federal ACP
and penalty payments should be provided to states on a purely
non-discretionary basis through a formula that allocates these
monies back to the state where the compliance payments
originated. New Jersey would consider the reallocation of these
funds to other states a serious loss of funds that are
currently being used to support New Jersey based resources, in
particular New Jersey solar. The funds should be provided to
the states for use in providing financial assistance to
renewable energy projects, as is the common practice among
state RPS programs. To do otherwise could seriously undermine
public support for RES and weaken existing state clean energy
programs. Also, the preference for use of these funds should be
for supporting all renewable technologies, both mature and
emerging, rather than targeted to only innovative technologies.
As Congress discusses the merits and design of a federal RES,
we strongly recommend that a federal program be designed to
complement and coordinate with New Jersey and other state
programs to the extent practicable. We would welcome the
opportunity to work with your staff and other stakeholders to
provide additional input and to review draft legislation.
Sincerely yours,
Jeanne M. Fox,
President.
______
Statement of Paul N. Cicio, President, the Industrial Energy
Consumers of America
Renewable energy has an important place within the U.S. energy mix
and should be expanded along with other domestic sources of energy.
Importantly, the Industrial Energy Consumers of America (IECA) believes
any decision to mandate renewable energy supplies should be left to
each state--not the federal government.
Each state has significantly differing renewable resource supply
profiles, electric transmission and distribution capacity and
associated costs that must be considered. Expanding use of renewable
energy will significantly increase the cost of electricity in a time
when the public and the manufacturing sector cannot afford increased
costs.
In general, renewable energy is our most expensive source of
electricity when the total costs of production, the federal subsidy,
increased cost of transmission, distribution and backup generation
costs are combined. As such, we are concerned that an aggressive
increase in the renewable energy share of the total power generation
market will raise the cost of electricity to the manufacturing sector.
Higher costs directly impact our competitiveness.
Sound U.S. energy policy demands more than simply an increase in
the supply of renewable energy. It must be globally cost-competitive
and reliable in supply.
Why? First, because the manufacturing sector competes globally with
companies whose energy costs are often lower and sometimes subsidized
by governments. (China is a good example.) And, when manufacturing
successfully competes globally it creates domestic high paying jobs
with benefits and exports that are critical to our country's economic
recovery.
Secondly, because manufacturing facilities must have an
instantaneous supply of electricity--not an intermittent supply, to
operate a variety of diverse and complex processes, some of which that
operate 24/7.
If Congress intends to pass an RES, it must lower the cost of the
resulting delivery of electricity. The best way to accomplish that is
to allow ``energy efficiency and waste energy projects'' to compete
head to head with renewable energy sources. Competition between
renewable energy and energy efficiency/waste energy will help drive
down the cost of the delivered electricity. Every home owner, farmer
and manufacturer will benefit.
The market--not the Congress should determine winners and
losers by letting renewable energy and energy efficiency/waste
energy compete head to head.
In many ways, energy efficiency/waste energy is better than
renewable energy because it is delivering clean lower cost
energy into the market that is more reliable . . . and less
intermittent like wind and solar.
Unfortunately, renewable energy is our most expensive form
of electricity. Non-hydro renewable energy is 402% more
expensive than nuclear and 227% more expensive than coal based
electricity according to the US Department of Energy, 2006
data.
Cost of Electricity
($/MWH)
Non-Hydro Renewable: $68.00
Natural Gas: $49.51
Nuclear: $13.54
Coal: $20.80
An important unintended consequence of a federal RES mandate is the
loss of competitiveness of the pulp and paper industry that uses
biomass as a feedstock. The federal RES creates competition for the
finite source of biomass in a regional area and could render paper
mills in that region non-competitive creating additional loss of jobs.