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House panel hears calls for fuel diversity


From the March 8, 2013 issue of Public Power Daily

Originally published March 8, 2013

By Robert Varela
Editorial Director

A March 5 House Energy and Power Subcommittee hearing featured strong calls for fuel diversity, including by two public power witnesses, American Municipal Power President and CEO Marc Gerken and Nebraska Public Power District Vice President and General Counsel John McClure. APPA submitted a statement strongly supporting policies that "allow for the widest use of a variety of fuels to ensure reliability of the electric grid and low-cost power to customers." 

"The best approach for affordability and reliability is a broad mix of generation sources, be it coal, natural gas, nuclear, or renewables," said subcommittee Chairman Ed Whitfield, R-Ky. "Each source can serve a purpose in the electricity mix, and each has strengths that can compensate for the other's weaknesses. And the best way to strike the right balance is through market forces--not government mandates or other market-distorting policies." The Environmental Protection Agency "should be considering the impacts of its regulations on fuel diversity, especially as it relates to baseload power," he said.

Gerken stressed the importance of diversity to the nation’s energy security and presented an overview of AMP’s balanced approach to power supply planning and the organization’s experience in siting various generation technologies. He focused on AMP’s experience in developing new run-of-the-river hydroelectric generation at non-powered dams on the Ohio River. AMP currently has four projects under construction at existing dams. Together, they represent the largest deployment of new run-of-the-river generation in the nation, Gerken said.

"We are encouraged by the increasing recognition by policymakers of the untapped potential for new and enhanced hydro power development in the United States," Gerken said. "To facilitate development and to ensure that new resources of all types can be economically and timely brought on line, it’s important that the regulatory process be streamlined to eliminate redundancies and provide developers and investors with added certainty." He told lawmakers that permitting delays cost AMP 60 basis points on a $1.3 billion bond offering.

There "is no single option for producing electricity, and due to regional differences and other considerations, public policy should encourage electric utilities to pursue fuel mixes that account for local, regional and national circumstances," McClure told the subcommittee. "A one-size-fits-all energy policy will not work in the electricity sector."

Although natural gas has been a game changer, it "is not the silver bullet," McClure said. "What many do not realize is coal remains a more competitively priced fuel for certain regions of the country due to the proximity of supply, especially in the central and western U.S. Natural gas may be a great option if your power plant is located near a robust network of gas pipelines, but unfortunately many of the existing coal plants do not have access to pipeline capacity to convert from coal to natural gas."

As utilities invest in assets with operating lives of 30 years and longer, the industry needs more regulatory certainty, McClure said. However, mandating exactly what a fuel mix must look like takes away creativity and ignores regional realities, he said. McClure testified on behalf of the Alliance for Fuel Options, Reliability and Diversity, a group of 17 consumer-owned electric utilities.

"The subcommittee should be concerned about trends in the electric industry that are reducing fuel diversity," APPA said in its statement. "While there are many benefits to using natural gas for electric generation, over-reliance on the fuel source, especially in areas of the country that lack pipeline capacity or storage, can result in price spikes to consumers and impact reliability if natural gas is not available to meet demand."

Electricity prices in New England were four to eight times higher than normal in February 2013 because of the lack of fuel diversity, APPA noted, and the Midwest Independent Transmission System Operator has concerns about whether there is sufficient resource adequacy in the Midwest beginning in 2016. 

Congress should consider legislation that promotes the development of other fuel sources for electric generation such as hydro power and nuclear, or that reduces demand for electricity through energy efficiency or demand response, APPA said. "Such legislation would include bills to streamline hydro relicensing requirements and other regulations limiting or preventing the expansion of hydro power, and to address nuclear waste. Removing impediments to their expansion as a fuel source would also promote fuel diversity."

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Jeanne Wickline LaBella
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