Energy Testimony

Interested Party Testimony of

Amy Gomberg, Environment Ohio,

 

Thank you Chairman Hagan, and members of the committee for the opportunity to speak with you today about Sub Senate Bill 221. My name is Amy Gomberg, and I am an Advocate with Environment Ohio, a non-profit environmental advocacy organization.  Today, I will focus my testimony on the advanced energy standard in Sub SB 221. 

 

I have organized my testimony to cover the following topics:

1.      Ohio’s renewable energy potential

2.      Ohio’s current energy portfolio and the impacts of federal carbon regulations

3.      The price of power; case study: Texas

4.      The economic benefits of renewable energy in Ohio

5.      Renewable energy standards; proven success in 25 other states

6.      Strong public support for a renewable energy standard in Ohio

7.      Recommendations for improving Sub Senate Bill 221

·        Enforcement

·        Benchmarks

·        Compliance

·        Definitions of sustainable resources

 

Ohio’s renewable energy resources, technological know-how and extensive manufacturing, transmission and transportation infrastructure provide Ohio with a recipe to become more energy independent. 

 

 

Ohio’s Renewable Energy Potential

 

Ohio has significant wind energy resources.  Attached to my testimony is a map that was released last year by the United States Department of Energy’s (DOE) National Renewable Energy Laboratory.  Additionally, I have attached a statement provided by Dennis Elliot, the principal research scientist at the DOE’s National Renewable Energy Laboratory who studied Ohio’s wind resources.  This map reveals the 66,000 MW of potential installed wind energy capacity in Ohio.  This map also carefully excludes 22 percent of the viable land area due to environmental and other exclusion factors.  Mr. Elliot’s research shows that even if we tapped into a small amount of Ohio’s wind resources we could still achieve 20 percent of our electricity needs from wind.  This is enough electricity to power over 2 million homes and could require anywhere from 1,400 (using the best available commercial technology) to 4,800 wind turbines.

 

With regard to solar energy, solar panels run on the light that lets you see, not the light that makes you hot.  The world’s largest solar markets are in Germany and Japan – neither locations as sunny as Ohio.  Within the U.S., New Jersey is the second-largest solar market, with Maryland and Pennsylvania coming up quickly.  I have also attached a map of the United States’ solar energy potential in comparison to Germany’s.  This map clearly shows that the solar energy resources in Ohio are far better than those in Germany.  However, due to German policies, Ohio’s own solar panel manufacturers have relocated to Germany because of the incredible demand for their product.  Additionally, I must comment on the solar energy resource map that was provided to the committee in earlier testimony by the Heartland Institute.  First let me explain that there are three primary solar energy generating technologies, solar photovoltaic (PV), solar thermal (solar hot water heaters), and concentrated solar.  The map that was previously provided compared the solar resources for concentrated solar.  Concentrated solar is only viable in the sunniest areas in the southwestern United States.  This technology would not be economical for Ohio.  Fortunately, as many other states have proven, the two other solar technologies work very well in areas that are even less sunny than Ohio.

 

Biomass, which is derived from plant matter, crops and other non toxic materials, is another resource readily available here in Ohio.  In fact, Ohio ranks seventh in the nation according to the U.S. Department of Energy’s Oak Ridge National Laboratory in the availability of biomass stocks.

 

 

Ohio’s Current Energy Future

 

The Ohio Public Utilities Commission of Ohio projects that Ohio’s demand for energy will increase about one percent per year through 2020.  Ohio is at a crossroads in which we can opt to stay the course with getting nearly 90 percent of our electricity from coal, or we can diversify and shield ourselves from the economic impact of a federal mandate that will put a price on carbon emissions.  Diversifying our electricity mix just by meeting Ohio’s future demand with renewable energy will also create more jobs and boost Ohio’s economy.

 

Ohio’s dependence on coal for our electricity supply has economic and environmental ramifications.  For starters, a majority of the coal that we burn in Ohio must be imported which means that we have to send more than a billion dollars out of state each year to import an increasingly expensive resource.  In addition, Ohio is the fourth leading contributor in the United States of carbon dioxide emissions which fuel global warming.  It is imperative that Ohio’s utilities begin to reduce their carbon dioxide emissions and diversify their electric generation resources before Congress sets limits on carbon dioxide emissions.  This is also important for Ohio ratepayers who would shoulder the economic burden of utilities not meeting carbon emissions limits by paying for these costs through the rate base. 

 

That said, coal will likely always be a part of Ohio’s electricity mix. However, gradually diversifying Ohio’s energy portfolio with renewable energy is a wise investment for Ohio.

 

A Carbon Cap Will Make Power From Coal More Expensive

 

There is growing consensus that concerted action must soon be taken to curb global warming emissions.  For example, legislation is pending in Congress that would significantly limit global warming pollution from power plants and other sources across the United States.  The pending bills require pollution reductions as significant as 80 percent below 1990 levels by mid-century.

 

With international pressure to act on global warming continuing to increase, it is only a matter of time before a U.S. carbon cap becomes reality.

 

A carbon cap will make power generated from carbon-intensive fossil fuels (like coal) more expensive.  According to a 2006 analysis by Synapse Energy Economics, one ton of carbon dioxide pollution will likely cost between $10 and $40 in 2010; and between $20 and $50 in 2030.  At these prices, given Ohio’s electricity-related carbon dioxide emissions of 145 million tons in 2005, the state’s carbon exposure is greater than $1 billion dollars per year.

 

Moreover, Synapse bases its calculations on relatively modest policy proposals – not on the more stringent emission cuts currently being considered in Congress.

 

The Electric Power Research Institute (EPRI) estimates that energy from a conventional coal-fired power plant would cost 77 percent more with carbon capture and storage.  Even energy from an IGCC coal plant, the type of plant best suited for carbon capture, would cost over a third more with carbon storage.  Moreover, carbon storage – on the scale at which it must be implemented to fight global warming – is an immature technology that will require many years of additional development before it becomes commercially viable.  As of 2006, there were only 21 demonstration projects in the world, and none were large enough to store the lifetime emissions of even one power plant.

 

The cost of future advanced coal-fired power plants is already a drastically more expensive.  The proposed Duke Energy IGCC power plant that has been approved in Indiana is to result in an average electric rate in crease of approximately 16 percent.  This cost does not include the carbon capture and sequestration that will be necessary if federal carbon limits are enacted.  The full article detailing this proposed power plant is attached to my testimony.[1]

           

 

The Price of Power: Shielding Ohio with the Fixed Costs of Wind Power

 

Any energy policy being considered for the state of Ohio should compare and contrast the future costs of energy resources in order to set a policy that will promote the least cost options thereby protecting residential, commercial and industrial users of electricity. 

 

The cost of wind power is almost entirely determined by the cost of manufacturing and installing the wind turbine technology. The wind that turns the turbine is free.  As a result, wind power can guarantee a fixed price for electricity over a period of 20 years or more.

 

CASE STUDY: Texas, leading the nation & saving ratepayer dollars

In 1999, the Texas legislature passed and Governor George Bush signed SB 7.  This bill instituted a renewable energy standard (RES) that called for 2,000 MW of new renewable energy capacity to be installed by 2009.  As of September 2007, Texas had installed over 3,900 MW of wind energy capacity alone, meaning it already had exceeded its goal of 2,000 MW. [2]  Moreover, it had done so two years before the deadline of 2009.[3]  Given its success in meeting its initial RES, Texas passed SB 20 in August of 2005, which increased the RES requirement to 5,000 MW by 2015 and set a non-binding goal of 10,000 MW by 2025. 

The economic benefits Texas has achieved through its renewable energy strategy are clear.  By 2002, wind power had added 2,500 direct jobs in sectors including manufacturing, construction, and services, with a payroll value of $75 million.  Wind power also created 2,900 indirect jobs in equipment manufacturing, transportation, and finance, with a payroll value of $96 million. Landowners also benefited significantly, with $2.5 million in land lease payments coming from wind power.[4]  School districts have benefited from wind power as well:  

Table 1: Property taxes paid to school districts by Texas wind projects, 2002[5]

Installed Wind (MW) Assessed Value ($ million) Tax Rate (%) Tax Due in 2002 1,102 $777 1.49 $11,614,460

The Union of Concerned Scientists published a report that examined the possible energy savings and economic benefits of attaining the 10,000 MW requirement versus a stronger, 20 percent renewable energy requirement.  The report found that there are significant economic benefits gained from attaining a higher RES. A 20 percent RES would provide a projected $542 million in additional revenues to farmers, rural landowners, and other biomass energy producers.  It would also generate $154 million in income for farmers, ranchers, and rural landowners from wind power leases. 

Additionally, the analysis estimated that the Texas RES reduced consumers retail electric rates by 5.2 percent (-0.4 cents per kWh) when compared to what retail electric rates would have been in a business as usual case.[6]  The effects on retail rates were also modeled for the 20 percent renewable energy scenario and the results are shown in Table 2 below.

 

 

 

Table 2: Job potential and rate impact – renewable energy vs. fossil fuels  

The benefits of renewable energy are not only absolute; they are superior relative to fossil fuels. The Union of Concerned Scientists' report found that renewable energy is more cost-effective and creates more jobs than fossil fuels.

 

Economic Benefits of Renewable Energy in Ohio

 

Making a commitment to developing Ohio’s renewable energy resources will also present Ohio with an opportunity to attract business and new jobs to the state.  A recent report released by Environment Ohio used a macroeconomic model to show the economic impact of diversifying Ohio’s electricity mix such that 20 percent of our electricity came from wind energy by 2020 versus continuing with our current electricity mix.[7]  The report found that the 20 percent wind scenario would result in a net gain of:   

 

·       40,000 additional person-years of employment,

·       $3.7 billion additional in wages paid,

·       $8.2 billion increase in the Ohio gross state product,

·       $1.5 billion dollars in property taxes generated to county governments,

·       $200 million dollars for landowners,

·       And, would result in avoiding 170 million metric tons of global warming pollution (C02), which is the equivalent to taking over 2 million cars off the road.

 

Ohio’s unique advantage exists in part because of our extensive manufacturing base.  Although hundreds of thousands of Ohio manufacturing jobs have left the state in the last several years the infrastructure is largely still present, and can benefit the growth of a renewable energy industry. A strong renewable energy standard is important because it proves a level of commitment to developing renewable energy in the state.  For a manufacturer of wind turbines or solar panels this commitment signals a market for their product. 

Many of Ohio’s rust-belt neighbors have capitalized on the opportunity to attract this burgeoning industry to their state in part because they enacted renewable energy standards.  Pennsylvania, for example, enacted a standard in 2005.  Their alternative energy standard includes both a timetable for implementation and penalties for non-compliance.  The PA standard also includes requirements for renewable energy production separate from their requirement for energy efficiency reductions.  Additionally, the PA standard includes a specific requirement for solar energy, directly jumpstarting the solar energy market.  Since the standard was introduced, the legislature recently passed another bill that improved the standard by making the enforcement language stronger.  After the inception of the standard in Pennsylvania, Gamesa, a Spanish wind energy company, established its U.S. headquarters in Philadelphia and is expected to create 1,000 new Pennsylvania jobs.  Ohio could establish a competitive edge for new businesses and jobs by enacting a strong renewable energy standard.

A good example of this opportunity is seen in the November 20, 2007 Cleveland Plain Dealer article “German solar vendor to build headquarters in Cleveland”:

IBC Solar AG, Germany's oldest solar vendor, will build its U.S. headquarters in Cleveland - and hopes to produce solar equipment here.

But whether the company begins manufacturing will depend on whether the state requires that a portion of the power sold here be generated with renewable energy technology such as solar panels and wind turbines.

IBC employs about 150 people in Germany and 200 worldwide to assemble solar systems manufactured by suppliers. Advocates of renewable energy say IBC's headquarters could be the first step toward creating an industry employing thousands of people in Ohio.

Despite the commitment to locate U.S. headquarters here, the company has nagging questions about the "renewable portfolio standard" in Strickland's bill.

"Our understanding is Ohio is in process of seriously considering some form of RPS," [Vaughn] Buntain, [IBC's vice president of international marketing,] said. "When we were there a few weeks ago, one of the things we emphasized was Ohio needed to do that."

 

Renewable Energy Standards; Proven Success in 25 Other States

Without a strong standard, renewable energy is far less likely to be developed.  The renewable energy boom is the result of a series of federal and state policies designed to promote cleaner sources of electricity. 

Twenty-five other states and the District of Columbia have enacted renewable energy standards.  Attached to my testimony is a map of the other states and their standards.  Most recently, Illinois enacted a 25 percent by 2025 renewable energy standard.  Colorado and New Mexico recently doubled their renewable energy standards to 20 percent by 2020, and Minnesota increased theirs to 25 percent by 2025.[8]  States are enacting and expanding renewable energy standards because they are experiencing both the economic and environmental benefits of doing so.  While many of these policies are in their infancy, RES states have already begun to reap the benefits in increased renewable energy development, reduced pollution, cost savings and economic growth.

 

The States with RES’s Lead the Nation in Renewable Energy Development[9]

 

·        In 2006, more than two-thirds of all new renewable electric generating capacity in the United States was built in RES states.  The same is likely to hold true in 2007, with more than 70 percent of planned renewable generation capacity expected to be built in RES states.

 

·        Of the top 20 utilities with long-term contracts for wind power in the United States, 17 of them are covered in whole or in part by RES policies.  This includes three of Ohio’s investor owned utilities which operate in RES states (AEP in Texas, First Energy in Pennsylvania, and Duke Energy in North Carolina).

 

·        Renewable energy will make up a larger proportion of new power generation in RES states in 2007 than in states without RES policies.  In 2007, renewable electricity generators account for about 38 percent of planned capacity additions in RES states, compared to just 12 percent in non-RES states.

 

Fig. 1. Proposed New Electric Generating Capacity Additions, 2007[10]

 

 

Strong Public Support for a Renewable Energy Standard in Ohio

In addition to our renewable energy resources, extensive manufacturing base and both environmental and economic opportunities there are other reasons to enact a strong renewable energy standard. 

Here in Ohio, the results of a statewide poll conducted by Public Opinion Strategies reveal that Ohio voters overwhelming support a strong renewable energy standard and view building new coal and nuclear power plants as a last resort.  Attached to my testimony is a memo written by Public Opinion Strategies which summarizes the findings of the poll and I would like to direct your attention to the five slides at the end of my testimony. 

·        The first slide shows how Ohio voters responded to the question of “Do you favor or oppose setting a standard for renewable energy in Ohio which would require utilities to obtain twenty percent of their energy from renewable sources of energy like wind and solar by 2025?”  Eighty percent of respondents had a favorable response with 49 percent strongly favoring and only 8 percent strongly opposing.

·        The second and third slides show that strong majority support for a strong renewable energy standard exists in all of Ohio’s seven major media markets as well as across the partisan political spectrum.

·        The fourth slide shows that of the people who favor a renewable energy standard 87 percent believe that utility companies should be fined if they fail to meet the standard.

·        The final slide shows that 69 percent of those respondents who believed that a renewable energy standard would raise their electricity rates still support the policy.  

 

Recommendations for Improving Sub Senate Bill 221

Given the economic and environmental benefits that Ohio could reap as well as the broad based support that exists for a strong renewable energy standard we urge you to make sure that any energy policy considered and voted on in the House of Representatives includes a strong renewable energy standard.

Regarding Sub Senate Bill 221 specifically we would like to comment on the following topics:

·       Enforcement

One change in the senate sub-bill that we urge you to re-consider has to do with enforcement of the renewable energy component in the advanced energy requirement.  SB 221 as introduced did not include specific enforcement mechanisms to ensure that utilities would comply with the renewable energy requirement, however it did leave the door open for the Public Utilities Commission of Ohio to establish its own criteria for how it would enforce the standard between the time legislation was enacted and 2025.  The Senate’s changes to the language in the sub-bill make the advanced energy requirement un-enforceable until 2025.  We urge you to direct the Public Utilities Commission of Ohio to enforce the standard on an annual basis starting at least one year after the enactment of this legislation.

 

·       Benchmarks

Sub SB 221 does not set any interim benchmarks for achieving the renewable energy standard. This makes it very difficult for the Public Utilities Commission to enforce the renewable energy requirement before 2025.  Twenty-five out of twenty-six renewable energy standards enacted in the United States include benchmarks that utilities must meet along the way to achieving the overall requirement.  Benchmarks are common practice in renewable energy standards across the country and without interim benchmarks in place, there is no transparent path to achieving the long term 12.5 percent renewable energy requirement.  This makes it more difficult for utilities and renewable energy businesses to plan for meeting this distant requirement.

We urge the committee to put clear interim benchmarks in place in order to send a straightforward message to renewable energy businesses that Ohio means business, today.  By including interim benchmarks businesses can effectively plan to expand in order to meet the growing demand for their product.

Attached please find the interim benchmarks for twenty-five other renewable energy standards that have been enacted across the country. 

·       Compliance: Penalties and Incentives

Sub SB 221 provides no sanctions for utility noncompliance.  Therefore, there is little guarantee that Ohio will see the multiple benefits of renewable energy.  To ensure that the benefits of renewable energy industry are maximized, there must be clear sanctions for noncompliance.  There are many ways in which states have chosen to penalize utilities that do not comply with the renewable energy standard.  Unfortunately, some states have enacted renewable energy standards with sanctions that are easier to meet than the required investment in the renewable power (for instance, a penalty that is absorbed by the ratepayers, rather than shareholder).  The most important aspect to creating an effective sanction is that it is clearly defined in the legislation, is only chosen by the utility as a last resort, and that the authority for the Public Utilities Commission to enforce the sanction is required.

In order to hold utilities accountable to the renewable energy standard we recommend that for each percentage below the minimum retail sales requirement during the period of noncompliance, the utility shall be pay an amount equal to two hundred percent of the average price of a renewable energy credit in to the Advanced Energy Fund, or if enacted the Speaker’s proposed Ohio Renewable Energy Authority.  The Advanced Energy Fund is housed in the Ohio Department of Development, and is currently available for grants and loans for renewable energy projects in Ohio.  Unfortunately, this fund is too small to provide for all of the projects requested, and is set to expire by 2011. 

Utilities may be provided with flexibility in order to meet the renewable energy standard that may also act as an incentive to generate increased amounts of renewable energy.  Allowing utilities to bank credits from exceeding the renewable energy requirement in any given year for up to 3 years will be an incentive to generate more renewable energy as soon as possible.

• Definitions

Sub Senate Bill 221 sets a 12.5 percent floor for the renewable, or as written, sustainable, energy requirement by 2025.  Included in the sustainable energy resources are solar, wind, tidal or wave, biomass, landfill gas, biofuel, hydro, or geothermal resources that are used in the generation of electricity and includes fuel cells powered by sustainable resources.  Setting an actual requirement for renewable energy and keeping it separate from non-renewable energy resources like nuclear energy, pump storage, and energy derived from fossil fuels including natural gas, oil, propane, and coal including coal-mined methane, are key to renewable energy developing in the Ohio. 

An area of improvement that we urge you to consider is raising the renewable percentage requirement to 20 percent.  Doing so would better position Ohio in the face of carbon limits to reduce pollution and compete with surrounding states who are bidding for renewable energy businesses. 

In addition to raising the renewable energy requirement to 20 percent we recommend that you eliminate “advanced nuclear” as a source of energy in the advanced energy tier.  Building new nuclear energy will be more expensive than building new renewable energy such as wind.  Cost estimates from a 2003 study by MIT found that electricity from a new nuclear power plant could cost 6.7 cents per kWh while the U.S. Department of Energy estimates that the per kWh cost of a new wind farm would be around five cents per kWh (compared to as high as 8.7 cents per kWh for a new advanced coal fired power plant).[11]  As evidenced by the hole found in the reactor at the Davis-Besse nuclear power plant outside of Toledo, nuclear energy poses some risks and no solution exists for dealing with all of the waste that has been left behind from our nation’s nuclear plants.  

Senate Bill 221 as introduced included important language regarding new advanced coal generation which is that it must be able to capture and sequester at least 80 percent of carbon emissions.  As Ohio faces an impending cap on carbon emissions it is critical that any new facility be a replacement to an older facility and be as close to carbon neutral as possible so that we may see actual reductions in emissions.  We urge you to reinstate the original 80 percent carbon sequestration requirement.

Regarding the inclusion of hydroelectric power, we urge you to provide more specificity in the definition to encourage more sustainable hydroelectric projects.  A sustainable hydroelectric facility is best characterized by the guidelines set by the Low Impact Hydropower Institute (http://lowimpacthydro.org), which considers the overall impact of a hydroelectric system.  Other states, including Pennsylvania, have required all hydroelectric facilities that count toward the sustainable energy requirements must meet the guidelines of the low impact hydropower institute.  I have included these guidelines as an attachment to my testimony.

Additionally, we must state the pivotal role that energy efficiency’s should play in Ohio’s clean and affordable energy future.  It is necessary that energy efficiency and renewable energy resources be addressed separately.  This is critical for getting the biggest bang out of each buck in terms of clean energy, reduced pollution, diversifying our electricity mix and economic development.  However, the energy efficiency component of Sub SB 221 also stands for improvement.  Technology driven energy efficiency is the cheapest form of electricity, and Sub SB 221 should require that at least 20 percent of Ohio’s electricity needs are met through energy efficiency by 2025.  This requirement should remain separate from the renewable energy requirement.

 

Conclusion

With so much to gain with regard to renewable energy including a cleaner environment, new economic opportunities, protecting existing jobs and creating new ones in the renewable energy industry, we should strive to enact a policy that will put us on an equal playing field with the other 25 states that have enacted standards.  A commitment to in-state generation of renewable energy would be a significant signal to renewable energy businesses worldwide that Ohio is actually working towards creating a profitable market for their products which will entice them to consider growing their business in Ohio.  If, however, we are slow to generate in-state renewable energy we could continue to be passed up by businesses that go to neighboring states like Pennsylvania and Illinois.  In conclusion, we urge you to consider including enforcement mechanisms, benchmarks and penalties that will ensure the swift development of in-state renewable energy generation within the next two to five years not the next seventeen. 

Thank you for the opportunity to testify today, I would be happy to respond to any questions that you have.

 

 

 

 

Notes