Utility Collaboration with Regulators: the End of Federal Energy Policy? Not Quite

On August 29, 2017, the Denver Business Journal reported that Xcel Energy and a coalition of interested parties announced a plan to shut down 660 MW of coal-fired generation 10 years ahead of schedule. It’s not the first time this proposal has been made by the largest investor-owned utility (IOU) in Colorado; so why is it interesting now?

Xcel Energy clearly sees this closure as a financial opportunity. Their team pitched it—unsuccessfully—to the Colorado Legislature during the 2017 season. Now they see a different avenue to replacing those megawatts with nearly three times the generating capacity: 1,000 MW of wind, 700 MW of solar and 700 MW of natural gas generation, plus a storage component. And, the proposal includes some infrastructure improvements in addition to the added capacity, which Xcel states should help this largely rural region.

Ultimately, the question of whether or not this proposal is the best one for both the utility’s stock holders and its rate payers remains to be answered. It is important to note that, while 660 MW of coal-fired generation would be retired, it would be replaced with 700 MW of generation fired by a different fossil fuel: natural gas. And, while it is broadly accepted that electricity produced by natural gas results in 50% fewer green-house gas (GHG) emissions than coal-generated electricity, the full value chain of natural gas continues to struggle with containing its product—and methane is a far more powerful near-term GHG than carbon dioxide. That’s important in an era in which regulations controlling natural gass release  have swiftly gone from pushing for the tightest regs ever to overturning those regulations and more, particularly on the national front. So, from a climate change perspective, this proposal may end up being a zero-sum game, at least from the status quo as measured today (increasing electricity demand not withstanding).

Which brings us to the issue of the role of Federal energy policy—past, present and future. Seeing a major IOU voluntarily offer up a proposal to a public utility commission in a relatively green state may not be a first, but it is nonetheless significant. When that proposal offers over 70% renewables and includes storage, it is worth taking note. And, when we see the business sector stepping up with its ideas of how to meet state environmental policy, while making a profit and intent upon meeting its obligations regarding reliability and price, one might ask if we even need to bother with Federal energy policy. Aren’t business and state regulators getting the job done?

No.

First, let’s look at Federal—and State—energy policy past. Ten years ago, this proposal wouldn’t have, and didn’t, happen. Without Federal policies in place that were backed and expanded upon by policy in states like California, New York and yes, Colorado, the markets for renewables would have had a difficult time getting to grid parity. And, without the solar pv and wind markets getting there (some of the time), it would have been even more unlikely that in 2017 we would see an IOU matter-of-factly including storage in a major resource plan. Even with global market advancement of these technologies, without the US’s Federal government engaged in at least modest moves toward lower-carbon energies, progress would have been much slower.

Energy policy present also still pushes these markets forward. Xcel cites Federal incentives for wind and solar as one reason the respondents to its RFPs may be in a position to offer competitively priced generation. So, what about energy policy future?

The reality is, that changing the energy policies we have in place—with respect to all energy sectors—is a bit like turning an aircraft carrier: it just doesn’t happen on a dime. Every US resident depends upon a number of energy forms for their security, safety, health, livelihoods, well-being and even happiness every single day. (The recent terrible storms in the Southeast did nothing if not underscore that reality, especially with respect to electricity.) Plus, investments in energy infrastructure, technology development, and resource extraction often span decades. Changing energy policy with care and patience is wise.

But, we’ve already seen the bow of the ship point to a different heading, with moves to relax fossil fuel regulations and open more public lands to extraction, all of which could lower the prices of fossil fuels. Such policies cannot alter the market single-handedly nor instantaneously. However, a four-year push to further empower fossil fuels and eliminate supports for alternatives will leave our markets looking very different than they do today. Business drivers—like $/MWh of new generation, as well as the influence of industries like reinsurance that factor in climate risks—will continue to push the energy markets toward lower carbon. And, fossils themselves will compete with each other: even with cheaper coal from Federal leases, it may be hard to compete against natural gas as its regulatory environment becomes more favorable, as well.

So, in four years, the ship will clearly be on a different heading. If we want to reduce climate risk, how do we reduce the degrees of change in heading? Wiser heads than mine have spent a great deal of time and resources on this question, so I won’t pretend to have an answer. But I’ve made a couple of observations over the years that might add a sliver of value to the pile of wisdom. And it all comes down to, “What’s in it for me” (WIIFM).

First, as an energy management consultant who has helped clients craft sustainability messages for over 20 years, I would tell those who are trying to keep Federal policy on track: “It is not about you.” Over and over, I’ve seen clients (and policy makers) so excited by their idea that they only talk about their idea. Frankly, no one cares. WIIFM, my friends. We energy wonks must speak to where people live. For example, the DBJ report on Xcel’s proposal noted a possible loss of nearly 100 jobs at the Comanche plant, with only a vague reference to “economic benefits” to replace that loss. If l lived in the area, I would be ticked off and against the proposal for that reason alone. “Tell me exactly how this proposal will replace and grow jobs in my area,” would be my response. Energy wonks should lead with answers to the WIIFM questions.

Putting on my communications hat, which I’ve worn for over 25 years, I’ll point to the new University of Colorado Boulder initiative called Inside the Greenhouse, lead not by scientists but by humanities wonks (hey, a wonk is still a wonk). With the aim of developing climate messages that will motivate folks outside of the discipline, this effort gets it right: by focusing on the human experience of climate impacts—from scientists, themselves, and the rest of us—they are developing messages that will get “normal people”  invested in climate change. Again: WIIFM.

And, in my role as a mother, wife and daughter? As a disabled person trying to manage work, family and home? I go straight to WIIFM, period. No matter who you are, it is easy to feel overwhelmed: by information, responsibilities, guilt. If I feel that way, I can only image how other people with much fuller daily plates must feel: desperate, over it, moving on. So, of course, don’t even talk to me about the climate or energy policy—whatever that is—unless you start with WIIFM.

All of which is why Federal energy policy still matters and why it isn’t getting done well—with the people’s interest at the core—if at all. We should take heart that proposal’s like Xcel’s are happening between business, regulators and interested third parties, even if they are imperfect. It represents the new normal, in which this kind of action goes on in parallel to, rather than on the sidelines of, Federal policy making… in which interactions between business, its regulators and its customers shape the Federal policy discussion. But, we still need to push for quality Federal energy policy and we need to make sure the public acts on it. After all, as former Colorado Governor Bill Ritter and former Colorado US Senator Mark Udall have both been known to point out, over two-thirds of US residents already live under renewable energy standards… even though the US doesn’t have one.

The public does care: we need the public to act. To get there, we must frame the current and potential Federal energy policy—and proposed changes—in terms of the public’s WIIFM perspective… always and repeatedly. If we do, maybe we can keep the ship more or less on course.

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