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<title>January 2007: Surge Control</title>
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<p align="left"><font face="Arial"><strong><small>About The Author:<br>
<br>
</small></strong><span lang="X-NONE" style="color: black"><font size="2">
ROGER FELDMAN, Co-Chair of Andrews Kurth LLP Climate Change and Carbon
Markets Group has practiced law related to the finance of environmental and
energy projects and companies for 40 years. In particular, he has analyzed
and executed a wide variety and substantial value of project financings. He
chairs the American Bar Association’s Committee on Carbon Trading and
Finance, serves on the Board of the American Council for Renewable Energy,
and has been a senior official in the Federal Energy Administration. He is
a graduate of Brown University, Yale Law School and Harvard Business School.</font></span></font></p>
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<img src="../images/feldman.gif" alt="Washington Viewpoint by Roger Feldman" border="0" width="375" height="75"><p align="left"><b><u><br>
</u></b><u><b>January 2007</b></u></p>
<p align="center"><font size="6"><b>Surge Control</b></font></p>
<p><strong>by Roger Feldman -- Bingham, Dana L.L.P.<br>
</strong><font face="Arial" size="2">(<em>originally published by PMA OnLine
Magazine: 2008/01/05</em>)<br>
</font><span style="font-size: 10.0pt; font-family: Palatino; color: black">
</span></p>
<p class="MsoNormal" align="left">Suddenly it’s 1970. There’s a war going
on that is increasingly unpopular. Nuclear power is coming back. Air
pollution (in the guise of global warming) is on the tips of everyone’s
tongues. The price of oil is skittering around without real connection to
underlying fundamental cause of daily events. We’re even talking about
“energy independence” again. But now we are in the age of surges. . . </p>
<p class="MsoNormal" align="left">In addition to the Iraq surge, the
President also has resolved to end -- by surge -- the threat to our energy
security. Thus, we have a domestic surge to build new power plants, coal
and nuclear. TXU, for example, has announced plans for ten new coal
plants. Texas will need them and the coal is at hand. Texas may have wind,
biomass, and solar in profusion, but these technologies simply are not up to
filling the perceived gap. A comparable issue faces much of the nation;
the nuclear licensing option is picking up speed as a way around GHG
problems associated with coal.</p>
<p class="MsoNormal" align="left">In the face of these developments the new
Very Green Congress has been talking about the potential of conservation to
provide “safe surge,” but the right formula for mobilizing it -- the tool,
for example, to reduce power usage nationwide -- does not appear to be self
evident. Nor have renewables, by themselves, nationally offered up a
“highly confident” formula for stepping into the gap.</p>
<p class="MsoNormal" align="left">So there are three issues presented which,
if not aggressively resolved, could leave the Green proponents in a position
similar to the engaged peace supporters: engaged but without a single plan
to cap the upcoming surge. Proposed legislation in this regard raises three
issues:</p>
<p class="MsoNormal" style="text-indent: -.5in; margin-left: .5in" align="left">
<span style="font-family: Symbol">�<span style="font:7.0pt "Times New Roman"">
</span></span>Should there be Federal standards for utilities’ mandatory use
of renewables, and/or mandatory use of efficiency measures, and/or mandatory
reduction of hydrocarbons for environmental reasons?</p>
<p class="MsoNormal" style="text-indent: -.5in; margin-left: .5in" align="left">
<span style="font-family: Symbol">�<span style="font:7.0pt "Times New Roman"">
</span></span>Should more than one of these standards (versions of which are
floating around the hill) pass through Congress, could their interaction
somehow be coordinated, so as to get the results of Federal standards all
pointing in the same direction?</p>
<p class="MsoNormal" style="text-indent: -.5in; margin-left: .5in" align="left">
<span style="font-family: Symbol">�<span style="font:7.0pt "Times New Roman"">
</span></span>Even if there are no such Federal standards and we are left
with multiple state standards, can there be mechanisms for meshing the
transfer of legal rights associated with such standards (e.g., RECs, white
tags, efficiency credits) through some type of trading regime?</p>
<p class="MsoNormal" align="left">There also remains a pragmatic question:
if none of the types of the foregoing Federal standards are forthcoming from
Congress, are the existing incentives (mostly from EPACT) sufficient to
drive major private sector activity toward meaningful movement away from
hydrocarbons?</p>
<p class="MsoNormal" align="left">Directly affecting the answers to these
questions are two substantive issues which have not been explored
adequately: </p>
<p class="MsoNormal" align="left">1. Do the uses of conservation and
renewables (such as solar) fully complement each other, such that their
application can be marketed as part of a simultaneous energy reduction and
production solution? Is it reasonable therefore for the convergence of
solar and energy efficiency to be promoted through revised governmental
incentives?</p>
<p class="MsoNormal" align="left">2. If solar and energy efficiency
are for the most part separable alternatives, not strongly complementary
ways to reduce energy consumption and/or reduce hydrocarbon production, does
this suggest that a different set of policy incentives should be promoted?</p>
<p class="MsoNormal" align="left">There exist, in the world of energy
efficiency, separate trade associations, separate existing and proposed
legislative titles, different types of corporate and project sponsors, and
different measurements technologies as to performance. As in the
environmental sphere, there necessarily are different protocols as to when
displacement of undesirable pollutants can be achieved and credits realized.</p>
<p class="MsoNormal" align="left">All of this being the case, how can the
present “surge” to hydrocarbons be offset by incantation of the value of
energy efficiency and renewables? Professional silos for each projected
energy/environmental reduction solution are being arrayed against integrated
articulation of industrial needs to which traditional utility suppliers are
only too glad to respond by conventional means.</p>
<p class="MsoNormal" align="left">In short, there is a need for a force
which through the green policy void fuses renewables and conservation. It
is not a role which the FERC has the legal power to play: it might even
cross cut FERC’s rearguard fight for deregulation/open access in some
regards. Perhaps dealing with issues is the best expenditure to which
scarce energy and environment R&D funds should be applied. The line item
entry in the Federal budget might make it more acceptable politically to the
Legislative Branch: “Surge Control,” or the resulting public relations
campaign slogan might make it more blog marketable: “Less juice, more
filling. . . “</p>
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text-align:left"><font face="Arial" size="2">
<span lang="X-NONE" style="color: black">ROGER FELDMAN, Co-Chair of Andrews
Kurth LLP Climate Change and Carbon Markets Group has practiced law related
to the finance of environmental and energy projects and companies for 40
years. In particular, he has analyzed and executed a wide variety and
substantial value of project financings. He chairs the American Bar
Association’s Committee on Carbon Trading and Finance, serves on the Board
of the American Council for Renewable Energy, and has been a senior official
in the Federal Energy Administration. He is a graduate of Brown University,
Yale Law School and Harvard Business School.</span></font></p>
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