Recently, Senator Lamar Alexander (R-TN) unveiled his “four grand principles” to drive the US towards a competitive energy future over the next five years.
At Americans for a Clean Energy Grid, we were pleasantly surprised to find ourselves strongly agreeing with Senator Alexander’s principles. In fact, these principles are so important to our goal of a modern, integrated, reliable, and efficient electric grid capable of delivering abundant and inexpensive domestic renewable energy to all users that we feel compelled to offer our own perspectives on them.
Grand Principle 1: Cheaper, not more expensive, energy
At Americans for a Clean Energy Grid we agree wholeheartedly with Senator Alexander – and almost everyone else – that low-cost energy is good for our economy. Unfortunately Senator Alexander makes the all too common mistake of failing to recognize that renewable energy is cheap energy.
Renewable energy resources – wind, solar, hydropower, geothermal – all have one thing in common: zero fuel cost. Over time, renewable resources push prices lower and displace traditional resources – coal, gas, nuclear, oil – with higher and always-volatile fuel costs. Senator Alexander should know this as well or better than anyone. Government investments in hydropower provided electricity for the first time to most of his home state of Tennessee, and over time made fools of critics who opposed them as too expensive. Ratepayers in the Tennessee Valley continue to reap the enormous “price suppression” benefits of low-cost renewable hydroelectric capacity built with taxpayer capital decades ago, but are struggling to absorb the high costs of operating and cleaning up aging coal-fired and nuclear power plants. The price suppression effect of renewables is being increasingly well documented in other regions as wind and solar resources enter the market, notably by three studies in the United States’Midwest, Northeast & Mid-Atlantic regions. Americans for a Clean Energy Grid commissioned a study by Synapse Energy Economics which found that adding more wind power to the grid in the PJM region can lower gas and coal consumption and reduce regional wholesale energy market prices, saving nearly $7 billion per year in the mid-2020s. So renewable energy is green in both senses of the word, but in this case, beauty may be in the pocket of the beholder.
The economic benefits of renewables will grower even larger as the costs of wind turbines and solar panels – which have fallen dramatically in recent years – plummet even further, to the point where wind and solar energy are cost competitive in every region of the country. And the transmission lines needed to deliver renewables from remote regions to population centers are the smallest part of an electric bill – less than 10% on average – so their cost is rapidly paid back by cheaper generation, which represents two-thirds of the average bill.
The low cost of renewable resources is – unfortunately – the best kept secret in the energy industry. It’s also a big reason why many traditional energy companies have been slow to engage with new resources like wind and solar, and reluctant to support the transmission investments that bring them to market. They consider it their market.
Grand Principle 2: Clean, not just renewable, energy
Like Senator Alexander, we at Americans for a Clean Energy Grid support renewable energy and all clean resources such as energy efficiency, demand response, storage, distributed generation, and smart grid technologies. That said, we see no evidence that renewable resources are less reliable and environmentally acceptable than traditional energy resources like coal and nuclear.
Solar is not only cheaper than ever, it’s getting easier on the eyes. We’ll soon have solar shingles that look like slate for traditionalists. Modern wind turbines spin more slowly while providing more power – virtually eliminating impacts on birds and other animals. With proper transmission investments, enormous amounts of high quality wind and solar could be developed far from sensitive conservation regions and out of sight of major population centers and recreational areas. And renewable resources completely eliminate the expensive and damaging impacts associated with extracting, transporting, burning, and remediation that come with traditional fuels. We’re not sure who it is that thinks coal plants or nuclear plants are things of beauty – it is certainly not their neighbors.
Renewables are also reliable – even when used at very high levels. The National Renewable Energy Laboratory showed that renewable resources can supply up to 80% of America’s electricity needs reliably, at low cost, and at all hours of the day, using current technologies. Analysis by Willett Kempton of the University of Delaware goes even further – showing that renewable penetration rates of 99.9% are now feasible and within our reach.
Grand Principle 3: Research and development
We couldn’t agree more with Senator Alexander’s call to increase government investment in energy R&D. Government-funded research has been crucial to the development of every major domestic energy resource, from oil and coal all the way through to shale gas and renewable energy. Global renewable energy investments in 2012 exceeded $100 billion – and America has the best and largest renewable energy resources on earth. America’s current leadership in shale gas production is a direct result of decades of government-supported research and generous tax credits. If we maintain the same investments in renewable resources, we will reap even greater economic benefits. Failing to do so would cede global leadership to competitors like China.
Grand Principle 4: Free market, not government picking “winners and losers”
Senator Alexander is correct that markets are extremely effective at providing ratepayers with the best energy choices at the lowest cost, but he overlooks two critical facts: (1) renewable resources thrive in competitive electricity markets; and (2) government policy always plays a critical role in bringing new energy resources to market.
In competitive markets like the PJM Interconnection and the area governed by the Midwest Independent System Operator (MISO), the tremendous economic advantages of zero-fuel-cost renewables like wind energy allow them to displace traditional fossil fuel power plants again and again. Vertically integrated electric utilities, which have held government-granted monopolies for the better part of a century, are often the most vocal opponents of electric competition. Watching what these utilities do, and not what they say, is even more revealing. The Tennessee Valley Authority, Georgia Powerand Alabama Power have, the past year or two, all negotiated very large purchases of wind energy – despite the absence of renewable portfolio standards in Tennessee, Georgia or Alabama. These utilities are purchasing renewable power because it meets their customer-oriented regulatory mandate to purchase the least-cost power available for their customers, even if it’s not their own.
And while it’s true that ingenuity, markets, and government-sponsored research have been critical to creating our nation’s secure and affordable energy system, Senator Alexander inexplicably ignores decades of smart, effective, and bipartisan policies and regulations which have been at least as important to providing the tremendous bounty of energy resources we enjoy today:
- The market-based cap-and-trade program to control acid rain (signed into law by George H.W. Bush in 1990) dramatically accelerated the development of low-sulfur coal in the West.
- The much-celebrated national shale gas boom was built on generous tax credits in place for two decades (from 1980 to 2000), plus extensive government-funded research over the same period.
- State legislatures and governors of both parties in thirty states have passed and signed into law state renewable portfolio standards to develop abundant and cheap renewable resources around the country.
- FERC policies enacted under Presidents from George H.W. Bush through Barack Obama which have gradually but methodically opened the electricity industry to competition.
Senator Alexander also said the role of government is in research and jump-starting new technologies, which ties to his earlier principle on R&D. We agree. We also believe clear, effective transmission policy, combined with new technologies like smart grid and demand response, will move us swiftly towards the “competitive energy future” Alexander seeks.
It’ll just be even cleaner and more economic than the vision Senator Alexander seems to be envisioning.
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