White House Chronicle

News Analysis With a Sense of Humor

Washington Can’t Save the Utilities from the Solar Onslaught

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Time was when New York dominated the collective and individual efforts of the electric utility industry. When the Edison Electric Institute (EEI) was founded in 1933, there was no question but that it would be located in New York. Likewise the Atomic Industrial Forum, which has morphed into the Nuclear Energy Institute, was founded there in 1952.

At least one large utility, American Electric Power, had its headquarters on Wall Street. In the early 1970s, I would travel from Washington to New York to interview AEP’s legendary chairman, Donald C. Cook. He believed in coal, and as the one-and-only fuel for electric generation. So much so that he kept a large piece of it on his desk. It was big and shiny and luminously black. In a twist of irony, Cook is remembered by his company through its only nuclear plant being named after him.

Electric utilities believed they had to be in New York because that is where they had raised their money — and they had needed to raise enormous quantities of money from the time of the first power plant.

Many myths attended the raising of capital. One was that to keep up with the blistering pace of electric demand, 7.5 percent per year at the end of the 1960s and the beginning the 1970s, utilities would drain the capital markets; take all the available money. It was said that Britain could not privatize the Central Electricity Generating Board because there was not enough liquidity in the London market to afford such a giant offering. (In reality, the public offering was oversubscribed when it was listed by Prime Minister Margaret Thatcher.)

It was clear by the 1970s, even before the energy crisis in the winter of 1973, that the U.S. government was going to be a bigger player in the future of the industry than the banks and investment houses. So gradually the trade associations moved to Washington, and the utilities moved their headquarters back into their service territories.

Washington was becoming all-important. It probably started with the National Environmental Policy Act of 1969, which was interpreted by the courts as having wide application. This was a lesson learned by the nuclear industry when it claimed exemption from NEPA under the Atomic Energy Act of 1954. No way, said the U.S. Court of Appeals for the District of Columbia Circuit. Afterward, the electric power industry realized that it had to be pro-active with legislation; it had to be in Washington and it had to lobby — and lobby hard.

The result has been that EEI, particularly under its well-liked president Tom Kuhn, has become one of the most effective trade association lobbying Congress. Its role was to prevent damaging legislation, to educate members of Congress, and to divert campaign funds to those who saw things its way.

Gradually, the whole industry came to look to Washington for redress; to ask for favors and stall damaging legislation. Its last great victory was in preserving dividends — so important to utility stockholders — from the taxman.

Now the industry is in a new crisis; a crisis that has arisen not because of policy, but of technology. Call it “the solar onslaught.”

The industry is fighting for its identity, its profitability, and its traditional role as the monopoly supplier of electricity. Solar rooftop installations are fraying the very fabric of the utilities and their business models and, for the first time in a long time, the powerful lobby that is EEI cannot help.

This is not a battle which will be fought in Washington. This is a state issue, and there are strange alliances ranged against the traditional utilities: the Tea Party with the greens, evangelicals with politically-correct Democrats.

Sadly, it is a battle in which the odds — as in journalism and telephony — are on the side of the new. Disruptive technology is at the gate. When rooftop solar is aligned with a really serviceable battery (the new Tesla offerings do not do the job yet), the utilities will feel like the makers of silent movies when the talkies came along.

The great star, Rudolph Valentino, did not survive the new technology. What of today’s utilities?  — This column was previously published in Public Utilities Fortnightly.

 

 

How to Move the Nuclear Project Forward

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Nuclear power ought to have everything going for it. It has worked extremely well for more than 60 years — a fact that will be celebrated at the Nuclear Energy Institute’s annual meeting in Washington this week.

Yet there is a somber sense about civil nuclear power in the United States that its race is run; that, as in other things, the United States has lost control of a technology it invented.

Consider: There are more than 70 reactors under construction worldwide, but only five of those are in the United States. They are in Georgia, South Carolina and Tennessee. Even so, costs are rising and rest of the electric utility industry is resolutely committed to natural gas, which is cheap these days.

Once nuclear power plants are up and running, they tend do so seamlessly for decades, often operating above their original design output. It is clean power, unaffected by fuel prices, doing no damage to the air and very little to the earth, except in the mining of uranium or in immediate contact with the used radioactive fuel, when it is finally disposed of — an issue made thorny by two presidents, Jimmy Carter and Barack Obama.

Carter banned nuclear reprocessing just as it was about to be commercialized, and Obama nixed the Yucca Mountain waste repository in Nevada. The trigger for his devastating decision was the opposition of Senate Majority Leader Harry Reid (D-Nev.), thought to be acting on behalf of the gaming interests of Las Vegas. Talk about wheels of fortune — a great technology endangered by legions of slot machines.

Overlooked when the nuclear titans gather in Washington will be two of nuclear’s greatest achievements: the nuclear Navy and the transformation of medicine. The Navy is largest maritime war machine in history with its aircraft carriers that can stay on station for more than a year and submarines that can go under the icecaps and stay submerged for months.

The utility industry seeks stability in all things, ergo it is not scientifically entrepreneurial. It embraces risk reluctantly. It accepts new technology when it is delivered with limited or shared risk.

It was that way with nuclear power, where the risk was shared with the government and sometimes the vendors. Likewise, with the development of today’s aero-derivative gas turbines, the military did the work and took the risk.

In this atmosphere it is easy to forget that nuclear is not a mature technology, but that it belongs at the frontiers of science. Today’s nuclear power plant is analogous to the black rotary phone — there is room for improvement.

But as there is no competition between electricity supplying entities, the impetus must come from elsewhere: government and incentivized private companies. Some like the General Atomics Corp. in San Diego, Calif., have reaped huge benefits by exploring the scientific frontier. While they are known mostly for the Predator drone, General Atomics' work on nuclear fusion has provided the building blocks for magnetic resonance imaging and tissue welding among dozens of medical advances and has enabled the company to use fusion science to develop the electromagnetic catapults for launching aircraft from carriers. If you get to ride a levitating train, it may be because it is suspended by electromagnetic forces pioneered in nuclear research by General Atomics.

Nuclear waste – the industry hates that term because of potential energy left in spent fuel — is the sad story of nuclear: too much yesterday (ideas codified and frozen 60 years ago), not enough tomorrow.

When aviation science has been stuck in the past, it has leaped forward by offering prizes to unleash invention: the first flight across the English Channel, the first Atlantic crossing, and now the first commercial foray into space, were inspired by prizes.

The good burghers of the nuclear industry might with their government allies think of cobbling together a really big prize that will change the thinking about how we deal with used nuclear fuel. At present, there are only two options: reducing the volume by cutting it up, leaching the useful stuff out and making glass out of the rest, and burying that or everything in a place like Yucca Mountain.

Generally in life and science, when there are only two options, there is a deficit of thinking. — For the Hearst-New York Times Syndicate

 

 

Fasten Your Seat Belt, Obama’s Driving Energy Policy

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By Llewellyn King
 
If President Obama were driving an automobile the way he's driving energy policy, he'd be stopped and breathalyzed.
 
The president’s latest decision to defer a decision on TransCanada's Keystone XL oil pipeline is a sudden swerve to the left, after his sharp right turn in curbing the enthusiasm of the Environmental Protection Agency for limiting electric utility emissions.
 
Similarly Obama has supported some new drilling for oil, but not in all the areas the industry would like to drill. He's in the middle of the road on this one, and no one is happy.
 
On nuclear power, Obama signaled a right turn and veered left. He came to office endorsing the nuclear option, including loan guarantees. But in a tip of the hat to Senate Majority Leader Harry Reid of Nevada, the president opposed the Yucca Mountain Nuclear Waste Repository, and undermined the case he was making for nuclear.
 
The mischief did not end there. Obama appointed Reid’s man, Gregory Jaczko, chairman of the Nuclear Regulatory Commission (NRC) to end the Yucca project and entomb, in effect, the $9 billion to $15 billion (depending on who is counting) in its abandoned tunnels. But because the government has longstanding legal commitments to take the waste, and has taken the money charged utilities (about $900 million a year) and treated it like tax revenue, the whole project has torn up the commission and landed it in court.
 
Jaczko, a former Reid aide, has riled the other four commissioners and the NRC staff to such an extent that the four went to the then White House chief of staff to complain about the chairman. An act of frustration totally unprecedented and deeply damaging to the credibility of the commission. Nobody resigned and a damaged regulatory body is now passing on the safety of the nation’s nuclear fleet. To all appearances, the chairman’s remit was to tear things up in the commission; that he has done.
 
In particular, the issue of licensing of Yucca Mountain has caused ructions. Jaczko has stopped the licensing in what the quasi-judicial Atomic Safety and Licensing Board in the case considers an illegal act. According to Marvin Fertel, president of the Nuclear Energy Institute, the industry wants the licensing to proceed if only to establish that Yucca was the right way to go and that it can stand the scrutiny that the NRC would give it in licensing. Fertel says that it's a marker for the future.
 
Opponents of Yucca, presumably including Jaczko, fear that a license would pave the way for the Yucca project to come back to life under a different administration. Did Obama, a lawyer, not know that political brute force in a regulatory agency is bound to throw it into disarray, and to leave its decisions to be impugned in court later? So why did he do it?
 
When it comes to alternative energy, Obama positively drove on to the left shoulder. The administration has promised wonders from wind, solar and advanced coal combustion. It has thrown money at these as though it were rice at a wedding. The most conspicuous of this mind-over-matter exercise was, of course, Solyndra. But the spending has been lavish, indeed promiscuous, and the bankruptcies are filling up court dockets and right-wing Web sites.
 
Yet, the gods have smiled on the Obama administration. A boom in natural gas, brought on by new technologies, and enhanced oil production, fathered by the same technological improvements, have brought oil imports down below 50 percent for the first time in 20 years. Electricity supply is holding.
 
Environmental organizations, having been cold-shouldered on climate change by the world in a time of economic upset, picked on the Keystone pipeline with fury. Particularly apoplectic about it has been the Natural Resources Defense Council, which hopes that by canceling the project, Canada would stop developing its oil sands.
 
No, says Canada. I spoke with Canadian Natural Resource Minister Joe Oliver shortly before Obama's first decision to delay the pipeline. Oliver said that if the decision weren't favorable, Canada would build a pipeline across the Rockies to British Columbia and export to China.
 
The latest setback has infuriated Prime Minister Stephen Harper's government, which now says it will no longer rely almost entirely on the U.S. market for its hydrocarbon sales.
 
So Obama’s latest swerve has angered our best ally and good neighbor, denied American workers thousands of jobs and will oblige refineries on the Gulf Coast to buy oil from unfriendly places on the world market.
 
He has also given the Republicans a handsome gift in an election year. Masterful! – For the Hearst-New York Times Syndicate

Gulf Spill Puts Energy Bill on Slippery Slope

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With energy, Senate Democrats find themselves between a rock and two hard places. Nonetheless, Sen. John Kerry, D-Mass., and Sen. Joe Lieberman, I-Conn., have introduced their climate and energy bill.

Its timing is awful. Its fate is uncertain. Yet its sponsors felt it had to be done now.

While the Gulf of Mexico is being damaged by a runaway well, spewing millions of gallons of oil-like bile from hell, any energy bill has the chance that it will be amended to become an anti-energy bill and will fail when hoped-for Republican support evaporates.

At present there is fairly wide industry support for the Kerry-Lieberman bill, particularly from the electric utility industry. Leaders of the industry and its affiliated groups, like the Nuclear Energy Institute, were in on the writing of the bill. Tom Kuhn, president of the Edison Electric Institute, and Jim Rogers, president of Duke Energy, stood shoulder to shoulder with Kerry and Lieberman when they announced their bill.

The three pressure sources driving the bill are:

•The November elections and the desire of endangered Democrats to show that they have done something about climate change and have tackled long-term energy problems.

•The Environmental Protection Agency plans to start regulating carbon dioxide as a pollutant next year, if Congress does not act.

•The environmental disaster in the Gulf, and its effect on public attitudes to energy development and energy companies.

The bill differs from the House bill, passed last June, which emphasized cap-and-trade to control carbon emissions; although both bills introduce carbon restriction by sector over time, and could be reconciled in a House-Senate conference committee, according to Chris Holly of The Energy Daily.

The carbon-reducing provisions in the Senate bill not only rely on pollution credits but also a wide range of incentives, including carbon capture, enhanced subsidies for nuclear and alternative energy.

The bill’s original intent was also to give a boost to offshore drilling, thus pleasing Republicans and the oil industry. But the Gulf disaster has changed that. The bill as introduced now contains language that will allow states to prohibit drilling off their shores—a potential killer of nearly all new leasing and exploration. And drilling is pushed 75 miles out to sea.

Just weeks ago, the bill looked as though it could pass the Senate with support from at least one Republican, Sen. Lindsey Graham of South Carolina, one of the original authors. But Graham withdrew when Senate Majority Leader Harry Reid, D-Nevada, said he would put immigration reform ahead of the energy bill.

While Sen. Mitch McConnell, R-Ky., the minority leader in the Senate, has come out against the bill, Graham still likes it but believes its chances of passage are slight. Kerry still believes Graham would vote with the bill, giving the Democrats that essential 60th vote, if the Democrats all stick together, which is unlikely with the bill’s nuclear and offshore leasing provisions.

A more likely result is that the bill will open old debates about big energy, like oil and nuclear, and pit it against alternative energy, mostly wind.

Comment on the bill has come slowly, as interest groups calculate the political alignment and realignment that the bill will bring about.

Offshore drilling gets more politically toxic as each day of failure to contain the situation in the Gulf passes. Nuclear gets more dubious as cost calculations rise. With or without legislation, the smart money is turning to natural gas for electrical generation and interstate trucking. At present, gas is cheap and plentiful.

There is a lot of money—$2 billion—in the bill for carbon-capture and sequestration, but this is ill-defined; and the idea of pumping millions and millions of tons of carbon dioxide into the earth remains a legal nightmare and a hard sell to some environmentalists. Clean coal, it seems, can never be pristine.

Here, then, is a bill for all seasons. Actually, more of a manifesto: an election manifesto. –For the Hearst-New York Times Syndicate