Economic Stimulus and the Power Industry

by Thomas R. Kuhn, Edison Electric Institute

The electricity-related provisions in the economic stimulus package sharply brought into focus the essential nature of electricity to our nation’s economic recovery. Our economy cannot get stronger, nor can our standard of living be raised, without a reliable, affordable and environmentally sustainable electricity supply.

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The package includes incentives for expanding energy efficiency (EE) and renewable energy, funding for researching and developing clean coal and carbon capture and storage technologies, provisions for training workers and money for developing the smart grid and plug-in hybrid electric vehicles (PHEVs).

These measures will create jobs, promote economic growth and reduce the country’s oil imports. At the same time, they will expedite the transition underway within the electric power industry to a more energy-efficient, lower-carbon future. When complete, this transformation will enable America to achieve its economic, energy and environmental goals for the 21st century.

The stimulus package emphasizes EE, including a provision that conditions some of the stimulus money for the states on their assurances to put in place pro-efficiency utility regulations and to make building codes more energy efficient. Since 1989, electric utility efficiency programs have helped consumers save enough electricity to power more than 83 million homes for one year. With this provision, we will be able to do even more to encourage EE.

The stimulus package also contains incentives for building a smarter, more robust transmission grid. These provisions will further the industry’s efforts to install digital electric meters and technologies that enable two-way communication capabilities between themselves and their customers.

Beyond enabling the companies to detect and repair outages and make customer connections faster, these smart technologies will give consumers greater control over their homes’ energy use. When coupled with innovative approaches to ratemaking and rate design, the smart grid also can help a utility or region reduce its peak-demand periods, resulting in greater cost savings and environmental protection.

The investment and consumer incentives in the stimulus package for PHEVs also will return many benefits. PHEVs have the potential to save consumers money at the pump while reducing emissions and decreasing U.S. dependence on foreign oil. We are working as partners with the auto industry to demonstrate the first generation of PHEVs. And we are studying the impact of PHEVs on the grid.

The stimulus package also will help the nation’s renewable energy industry. Two important elements are a long-term extension of the production tax credit and a loan-guarantee program for wind and other renewable energy sources. These give utilities, developers, manufacturers and investors more incentive to maximize the vast potential of renewable technologies.

Even with these incentives for renewable energy, we must continue urging policymakers to strengthen and expand the nation’s transmission system to deliver the electricity these energy sources generate. Renewables—especially wind energy—typically are located far from the population centers that want their energy.

In particular, more work needs to be done to resolve siting issues, especially if the transmission lines have regional implications. The federal government has been given limited authority to step in if the states cannot resolve a siting issue, and we will continue to work with the states and federal government to get lines sited in a reasonable period.

The electricity-related provisions in the stimulus package complement the steps electric companies already are taking to reduce their carbon emissions in the near term. For the mid- to long term, the industry is aggressively working to build advanced nuclear plants and coal plants with the capability to capture and store their carbon emissions.

Nuclear energy generates about 20 percent of the nation’s electricity and gives us one of our only sources of on-demand, zero-emissions electricity. I am happy to say that the nuclear power industry is experiencing a rebirth, with a number of applications filed last year for new units.

Coal, because of its low cost and abundance, generates about half of the nation’s electricity. To ensure that we can continue reliance on this domestic energy source, we, in partnership with the government and others, are beginning to develop carbon capture and storage technologies. These technologies, while at least 15 to 20 years from large-scale deployment, hold great promise and will be indispensable for meeting global environmental goals. Coal is a major source of electricity generation in the U.S. and other parts of the world, including China and India.

These advanced generating technologies also will be critical for keeping electricity reliable and affordable in a low-carbon future. For added consumer protection, EEI’s board of directors have adopted a climate framework that includes a collar on the price of carbon, with both a firm ceiling and floor. The framework also calls for the use of offsets—cost-effective activities, such as planting trees and capturing methane from landfills—for reducing carbon emissions.

And, we are asking that allowances for carbon emissions be allocated, rather than auctioned, to local distribution companies. This will enable the benefits to be returned to our customers under the oversight of public service commissions. Remaining allowances would be allocated to merchant coal generators.

With the stimulus package now in place, we are excited by the challenge and optimistic that we—by continuing to work with all of the stakeholders and policymakers involved in our issues—can help move the nation forward.

Author

Thomas R. Kuhn is president of Edison Electric Institute. Visit www.eei.org for more information.

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