by Planning Engineer
A recent posting presented taxonomy of potential policy perspectives around climate/energy policy. The ensuing comments brought home the unfortunate recognition that energy providers have not advocated specific actions and preferred directions for climate/energy policy. I think they have a good story. Why aren’t they telling it?
While you can question the accuracy and appropriateness of the following declaration, “We are headed for serious adverse climatic consequences if we don’t adopt clean, affordable efficient low cost renewables”, you can’t dispute that it serves to effectively frame an advocacy. Energy providers need to similarly articulate an alternative message or set of messages that positively voices their concerns to regulators and policy makers.
What are the messages from energy providers to date? (I could easily of have missed something. So if you know of anything; I’d appreciate your sharing them.) Energy providers recognize the following: They are not climate experts but see the policy proposals addressing climate change as being very challenging. Proposed renewable technologies are not in many ways suitable alternatives for conventional technology and they will increase costs and degrade reliability with limited benefits. Some energy policies do not recognize the local differences in the ability utilities have to employ various renewable technologies. Compared to lawmakers and regulators they are relatively powerless. The basic messages I’ve seen from utilities are along the lines of: “Please be fully aware of and consider the cost and reliability implications of the proposed policies as well as what is possible in a limited time range. We stand ready to go along and do the best we can with whatever policies are adopted”.
On the one hand I admire utilities for staying out of the debates around the environmental consequences of emissions. They are not climate experts and any advocacy or research efforts sponsored by them in this area would be highly suspect. They should respond to public concerns of that sort rather than seek to alter the debate. On the other hand, I fear that energy providers may be ignoring their responsibility to their consumers by taking the path of least resistance. Uncritically accepting environmentally proscribed programs may meet short run business goals better than more forceful efforts at resistance. Unfortunately the political landscape often allows utilities to profit from making poor resource choices endorsed by regulators. Perhaps such speculation is too harsh and it’s just fear on the energy provider’s part that if they do not cooperate and become party of the “solution” that the measures adopted and imposed on them will be harder still.
The challenge for energy providers is “cooperating” with the process and supporting the concerns of those in power while at the same time protecting the interests of those they serve. Developing coherent and simple messages for utilities is a challenging task that I will take a stab at in the hopes that it might inspire better efforts.
The Traditional Utility Focus
Coming of age in the utility business the stated mission was to provide economic and reliable power. A judicious balancing of cost and reliability should be expected to vary across place and time. As affluence increases more can be spent on providing reliability. It is a balance because as you undertake expanded measures to improve reliability, costs increase disproportionally. Improving reliability by 10% might cost X dollars. Going for another 10% increase in reliability will cost more than X. The increment for the next 10% will be even greater perhaps many multiples. Eventually you reach a point of diminishing returns such that there is a balance between reliability and cost. In any and every case it would be recognized as folly to try building the most economic or the most reliable system possible while ignoring the balancing value.
By the 1990s energy providers realized they were leaving something important out of their mission statements. Mission statements were appropriately modified to recognize the goal as, “providing economic and reliable power in a publicly/environmentally responsible manner”. Again the balancing of the factors is of major importance. One priority cannot be undertaken in isolation ignoring its impacts on the other factors. Adverse consequences can result whenever any one factor is prioritized unduly. (See this piece on solar DG increasing carbon.)
Two Very Important Questions
- Are energy utilities the most cost effective socially beneficial instrument for limiting emissions?
- Secondly, if utilities are the best mechanism to achieve needed emission goals, who should pay for the changes?
Emission policies focus on utilities and their consumers perhaps only because they are easy to regulate and as such they become the most politically expedient path. Are their “better” targets and “better” cost recovery mechanisms?
A Rough Justification
All humans have some sort of carbon footprint. The problem is reducing the collective footprint and determining where reductions should occur and who should be obligated for making those reductions? Most human activities result in emissions. In relation to the accompanying emissions, some of these activities are of great value and some of lesser value. According to the EPA, electricity makes up 38% of US carbon dioxide emissions by source. The benefits that affordable electricity provides are often pretty worthwhile–supporting business and industry, enabling information technology, powering hospitals and universities, heating and cooling our homes, storing and preparing our food and providing a host of other creature comforts. Electric consumption and increases in the standard of living and the reduction of poverty go hand in hand across time and place.
Based on the value of electricity, it must be asked, “Are there other sources where you can get a greater reduction in carbon based on the costs imposed?” (Readers – you might help me. Are there good reasons, besides political expediency, to focus so strongly on carbon from electric energy production? I know that imposing a “carbon tax” is controversial, but not sure it’s clearly inferior to just focusing on energy production. I may not have a good understanding here.) Even if there are no better options it still must be asked, “Who should pay for the increased energy costs?”
These two questions become particularly important as you consider the characteristics of electric consumers in the US. Many lead simple lives on low incomes with simple comforts where the cost of electricity makes up a large portion of their budget. While for more affluent Americans energy cost may seem high, for them cost increases do not impose anywhere near the same level of burden. This study found that low income families emit on average 76% less CO2 than their high income neighbors. Putting a large chunk of the responsibility for our collective carbon footprint disproportionately on the backs of low income families who bear minimal responsibility for the problems should create significant concerns. It’s wonderful that some people have the ability to travel extensively. It’s great that many others can afford multiple cars and have the resources for long commutes and avoid using public transportation. I did some rough calculations and I don’t know that it’s a good thing, but a couple of yahoos in a cigarette boat can put more carbon in the air in a single weekend than many families would contribute in a year powering their homes. Why are we singling out the electric consumers to compensate for the footprints of others? When utilities absorb the cost, the wealthiest do not pay anywhere near their fair share related to their average contributions to the problem.
You can say utilities are wealthy and have plenty of money, but utilities money comes from the consumers they serve. Except for a small percentage of profits denied to shareholders, when you expect unities to cover costs, it is the consumers who will pay. Accomplishing social good through mandated utility programs function as an involuntary regressive tax. Efforts to make utilities pay have serious unintended social justice implications. Having utilities experiment with alternative technology is gambling with the resources of those who can least afford it.
Unfortunately it gets worse. Programs like residential solar primarily benefit people with more wealth and for subsidized by those with less resources. For example in this piece cited earlier, it is noted that the beneficiaries of net metering in California have on average 68% more income than the average households in the state who are subsidizing them. We don’t seem to be learning ay lessons from Germany’s grand experiment and the resulting energy poverty it created.
If electric generation can be shown to give society the best bang for a buck to reduce carbon, let’s go with it. But let’s pay for it with equitable cost recovery schemes. Don’t place the responsibility where it is the least justified and the most crushing.
The Message that is Not Getting Out
Here’s an unpolished first pass stab as to what utilities could be adding to the dialogue, based on what they do know, to take a stronger stance on behalf of their consumers.
The currently proposed expanded policy actions to reduce greenhouse emissions cannot be justified at this time. They impose tremendous costs, adversely impact the reliability of the grid and they have not been sufficiently demonstrated to provide significant net environmental benefits as part of any thorough lifetime analysis.
The energy sector is critical to our nation’s economy, infrastructure and serves to greatly improve the quality of life for many struggling Americans. We caution against energy policies that disproportionately burden average and low income utility consumers. Opportunities for reducing emissions from other sources should be more fully exploited before undertaking any increased expansion of mandates and requirements impacting the energy sector.
We will continue to exploit available alternative technologies when their use can be justified. We will continue research and programs that explore potential technological innovations and improvements so that the electric sector can continue to increase its contributions to the improvement of our environment. As opportunities arise to meet policy objective through new technologies we will employ them when they can work within our systems to provide cost effective and reliable energy to our consumers. When new approaches are effective for reducing emissions, but represent a sharp increase in energy costs over preferred alternatives, we will work with policy makers to formulate ways to appropriately allocate the undue costs associated with these endeavors. We urge the avoidance of any policy measures that must be subsidized disproportionately by those who are among the least capable of bearing the cost burden and also among the least responsible for the harm being mitigated.
Perhaps I’m politically naive and such pronouncements would be counterproductive because it’s a message no one wants to hear. Is one end of the political spectrum throwing concern for the less fortunate under the bus in order to keep focus and momentum around solving an environmental crisis? Is the other end of the spectrum afraid of expanding the role of government to more broadly attack carbon emissions? I’m not worried about utilities – they will likely survive and do well under any mandates or environmental regulations. I’m worried about “average” consumers and wondering who will have their back. Sometimes we fall back and say we need to respond to what the public wants. I’m not convinced that just because some majority of the population somewhere is in favor of assigning utilities the burden of emission reduction and adoption of clean technologies, that this automatically does away with the social justice concerns. Consider Germany today has millions living in energy poverty. Even if the majority of struggling households believed in the policies and asked for them, was the massive wasteful transfer of wealth from the poor to the wealthy an appropriate government action? Do we want to emulate that?
JC note: This is a guest post, please keep your comments civil and relevant.