Energy Execs Deal with it

 

When it comes to crafting a comprehensive energy policy, America’s leading utility executives all agree on one thing: It won’t happen. 

 

While they may say that a long-term plan would give the market the certainty it needs to make the appropriate investments, they acknowledge that the philosophical and regional variances among the vested interests will prevent that. That’s why they are resigned to stop-and-go policies as well as the creation of patchwork laws across the states. In the end, it is their job to provide reliable service at economic prices. 

 

“Despite the ebb and flows, we will have the same pie chart,” says Tom Farrell, chief executive of Dominion Resources at the EnergyBiz Leadership Forum in Washington, D.C. “The pieces of the pie may move but we still need all of them.” 

Dominion, for example, has both coal and natural gas plants under construction. It is also looking to invest in off-shore wind to be located near its Virginia base. 

Farrell is cautioning against trying to develop a single resource at the expense of others, noting that right now the emphasis is on shale-gas as a bridge to the future. While he says his company is exploring the Marcellus region for such resources and will invest billions to access it, he says that the national infrastructure does not yet exist to accompany such an expansion of natural gas. 

 

Southern Co. and American Electric Power, both of which are awash in coal-fired power, say that an abrupt transition to less carbon-intensive fuels would harm their ability to serve customers at reasonable prices. Southern, for instance, notes that its coal fleet operates nearly error-free: In recent times, it has had a 1.6 percent outage rate -- a reliable asset that the utility says must be preserved for customers. 

 

That’s not to say that both Southern and AEP are not investing in the future. Tom Fanning, chief executive of Southern, told the EnergyBiz audience that his company has licensed to China its coal gasification technology that purports to scrub coal of nearly all of its impurities before they go out the smokestack. AEP, meanwhile, has carbon capture and sequestration projects pending in two states. 

 

“We have to transition our fleet in the right way in the right time frame,” says Fanning. “It has to have an economic consequence that is reasonable.” 

 

Government’s Role

 

While those utilities with lots of coal are urging prudence, at least one of the chieftains at the conference said that the push to go green is welcome. NextEra Energy, formerly FPL Group, owns almost no coal and is a builder of wind and solar facilities throughout the United States. 

 

Lew Hay, chief executive of NextEra, says that his company supports reasonable actions by the U.S. Environmental Protection Agency. The agency’s plans to gradually limit carbon emissions, for example, would lead to the construction of more wind and solar plants and particularly in those states with renewable portfolio standards. 

 

When the major technological innovations are assessed, one can conclude that the government has always played a part, Hay says. That will be true for this current time period that is focusing on clean tech investment. 

 

“Clearly, there’s a cost to modernizing our fleet,” says Hay. “But I don’t think that replacing older facilities will be the train wreck that some are predicting. Tell us what you want us to do and give us enough time to do it.” 

 

But therein lay the predicament: While utilities may be asking for certainty, they cannot agree even amongst themselves on what steps the federal government should take. Beyond that, the very nature of government itself means that such long-range policies will remain out of reach. That is to say that utilities see in terms of 30-50 year increments -- something that is beyond the scope of political officers who must run for office every few years. 

 

Configuring a national energy a policy is complicated and expensive. That means a thorough and widespread roadmap will remain elusive. Utilities must therefore work within the states and with those policymakers to form the rules that will help grow regional economies. 

 

“We do it piecemeal the best way we can,” says Mike Morris, chief executive of AEP, during the EnergyBiz conference. AEP has a compelling story to tell: In 1990, it sought permission to build an 89-mile transmission line through West Virginia and Virginia. After a lot of twists and turns -- and 16 years later -- the project finally began transmitting power.

 

The executives concur that the reliability, quality and price of their services will dictate their most immediate decisions. But they all remain anxious over how potential regulations will affect their ability to deliver on those promises.  

 

EnergyBiz Insider has been named Honorable Mention for Best Online Column by Media Industry News, MIN.

So what do you think? Please share your thoughts by posting a quick comment below, or by sending a longer reply to energybizinsider@energycentral.com.

 

Follow Ken on www.twitter.com/freehand1200

Copyright © 1996-2010 by CyberTech, Inc. All rights reserved.

To subscribe or visit go to:  http://www.energycentral.com

To subscribe or visit go to:  http://www.energybiz.com