|
Server : Apache/2.4.62 System : FreeBSD fbsdweb2.web.rcn.net 14.1-RELEASE FreeBSD 14.1-RELEASE releng/14.1-n267679-10e31f0946d8 GENERIC amd64 User : www ( 80) PHP Version : 8.3.8 Disable Function : NONE Directory : /domains/enrgy/feldman/ |
Upload File : |
<html>
<head>
<title>February 2007: Push Me -- Pull You Policy Power Pet</title>
</head>
<body style="font-family: Arial" vlink="#808080">
<div align="center"><center>
<table border="0" cellpadding="8" cellspacing="0" width="98%" bgcolor="#000000">
<tr>
<td width="100%" valign="middle"><a name="top"></a>
<img src="../images/pmamagsm.gif" alt="PMA Online Magazine" border="0" align="right" width="229" height="100"></td>
</tr>
</table>
</center></div><center>
<table border="0" cellpadding="8" width="98%">
<tr>
<td width="25%" valign="top" align="center">
<!--webbot bot="Include" U-Include="wv_sidebar.htm" TAG="BODY" startspan -->
<table border="0" cellpadding="8" width="98%" id="table1">
<tr>
<td width="25%" valign="top" align="center"><map name="FPMap0_I1">
<area href="http://www.powermarketers.com/adrates.html" shape="rect" coords="14, 297, 97, 322">
<area href="http://www.powermarketers.com/pmajobs.htm" shape="rect" coords="11, 230, 95, 257">
<area href="http://www.powermarketers.com/main.htm" target="_parent" shape="rect" coords="12, 163, 96, 189">
<area href="http://www.powermarketers.com/power2.htm" target="_blank" shape="rect" coords="12, 95, 96, 121">
<area href="../pmamag.htm" shape="rect" coords="11, 29, 96, 54"></map>
<img rectangle="(12,163) (96,189) http://www.powermarketers.com/main.htm##_parent" rectangle="(12,95) (96,121) http://www.powermarketers.com/power2.htm##_blank" rectangle="(11,29) (96,54) ../pmamag.htm" src="../images/magmenu.gif" alt="PMA OnLine Magazine Menu" border="0" align="center" usemap="#FPMap0_I1" width="110" height="350"><p>
<a href="../searchpma.htm">
<img src="../images/archives.gif" alt="Archives Search" border="0" align="center" WIDTH="70" HEIGHT="40"></a></p>
<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>
<p class="BodyText05DS" align="left" style="text-align:left"> </p>
<p> </p>
<p> </p>
<p> </p>
<p> </p>
<p> </p>
<p> </p>
<p> </p>
<p> </p>
<p> </p>
<p> </p>
<p> </p>
<p> </p>
<p> </p>
<p><a href="#top">
<img src="../images/b-t-top.gif" alt="Back To Top" border="0" WIDTH="71" HEIGHT="35"></a></td>
</tr>
</table>
<!--webbot bot="Include" i-checksum="19883" endspan --></td>
<td width="75%" valign="top">
<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>February 2007</b></u></p>
<p align="center"><font size="6"><b>Push Me -- Pull You Policy Power Pet</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="BodyText05SS" align="left" style="text-align:left;text-indent:0in">
Energy/environment policy often looks like a “Push Me Pull You” Dr.
Seuss-type fictional pooch. These days it appears that energy policy is the
tail on the dog of global warming environmental policy. The paradoxical
result may be that in the power generation sector it will be “business as
usual,” as the electric industry prepares to meet an urgent demand for
supply increases in several disparate regions of the country.</p>
<p class="BodyText05SS" align="left" style="text-align:left;text-indent:0in">
“The most inconvenient truth about global warming is that we cannot stop
it,” suggested a recent <u>Newsweek</u> columnist. India and China are
going to build 650 coal-fired plants by 2050 (by which time world energy
production will have doubled) emissions of CO<sub>2</sub> from which will be
five time those targeted by the Kyoto accords. He might have added that the
US power industry is poised to meet near term power shortages in several
regions of the country by adding myriad new coal plants here as well. Clean
coal and hybrid cars promise to alter this picture - but they are not there
yet. Meanwhile power rates are rising as rate caps are withdrawn in
deregulated states and the energy policy dog is beginning to emit a
decidedly consumerist growl.</p>
<p class="BodyText05SS" align="left" style="text-align:left;text-indent:0in">
This is not to say that acquiescence to global Armageddon is a wise or a
necessary policy. The Pew Foundation recently recommended “coping with
climate change” by “mitigation” and “adaptation” (<i>e.g.,</i> anticipating
the flooding of seaside resorts). I would suggest that the same approach -
done with overriding concern for energy security policy - is what should be
hoped for in the national energy policy. What we have today is a
hodge-podge of regional product preferences, arm waving about techno-fixes
and a relatively very small penetration in the power marketplace by the
technical fixes which do presently exist. And what we have is a lack of any
working policy to mesh available renewables and conservation strategies.</p>
<p class="BodyText05SS" align="left" style="text-align:left;text-indent:0in">
One very important reason for this dilemma is that the ultimate delivery
system for our electric energy is our regulated utilities. They
understandably have to keep at least one eye cocked for policies that will
increase their costs or leave them lagging behind the market demand curve.
They are, after all, publicly-traded companies.</p>
<p class="BodyText05SS" align="left" style="text-align:left;text-indent:0in">
Utility policy makers may still be getting over the battle fatigue resulting
from righteous efforts to make pure theoretical economics drive optimal
pragmatic results in the real world. The result of this “deregulation” has
been to leave us with rising retail prices as price caps come off, subtle
private power marketing strategies which take advantage of the price
established by the highest marginal unit, and increased consolidation and/or
continue market dominance by a handful of companies. Such single firm good
business may not (in the absence of significant regulatory intervention)
either produce an improved fleet of less carbon-stained generators or an
innovative surge of green technology (or even energy efficiency
improvements).</p>
<p class="BodyText05SS" align="left" style="text-align:left;text-indent:0in">
It certain has produced rate-shocked and angry customers in many parts of
the country, who want to hear about price, not carbon rollbacks.</p>
<p class="BodyText05SS" align="left" style="text-align:left;text-indent:0in">
There are now two new basic utility regulatory/strategies to at least
mitigate the global warming future while still meeting supply requirements:
one conservation/power reduction oriented, and the other green
power/production oriented. They are being presented in similar regulatory
forums. In the absence of some conscious effort to intermesh them, they can
conflict. The following scenario could, without too much imagination,
result: utility plant choice swinging to fossil fired behemoths, merchant
green power suppliers being marginalized or transformed into minor
satellites of utilities, and the movement to creatively abate climate change
devolving into an expensive but delusionary PR campaign (with lots of green,
sunshine, happy children, and blue skies). It is important that energy
efficiency and renewables policy be reconciled.</p>
<p class="BodyText05SS" align="left" style="text-align:left;text-indent:0in">
The first new regulatory trend proceeds from an apparently valid principle:
elimination of the need for new power plants reduces new pollution and (to a
degree) insecure energy supply. To do this so far, principally individual
states have begun summoning energy efficiency standards into the breach -
particularly where no retail competition exists. But this in turn triggers
the age-old problem -- utilities are paid to produce power and realize on
asset additions. Unprofitable utilities drag down our economy as well as
themselves. Two new responses to this problem that have been injected into
the argument are (i) predetermining utility profits each year, thereby
separating their earnings from the volume of electricity they deliver (<i>i.e.,</i>
“decoupling,” already used for several gas utilities nationwide) and
(ii) possibly, but not necessarily, linked to also rewarding utilities for
meeting efficiency standards which are ratcheted up.</p>
<p class="BodyText05SS" align="left" style="text-align:left;text-indent:0in">
There is a logic in this, particularly from the point of view of energy
efficiency investments in items such as transmission upgrade. But depending
on how it is implemented, it could have a variety of less desirable impacts
on the operation of the resource performance standards which have been of
value to green power merchant facilities. If there is less power to be
bought and sold by utilities, then there is less need to buy green power
from third party merchants. And if assured profits have been set at a high
enough level, such green power as needs to be produced can be produced with
“profit-insulated” internal capital investments. The old fossil plants can
continue to roam the plains. The positive impact of evolving new technology
competition is retarded for another energy generation.</p>
<p class="BodyText05SS" align="left" style="text-align:left;text-indent:0in">
But the other countervailing new regulatory trend can also head in
suboptimal directions. It is, taken to the extreme, which certain European
countries have followed, to require payment by utilities of
“feed-in-tariffs” which require utilities to purchase “clean energies” at a
premium set by the government at a price passed on to consumers (or, more
modestly, at a price set a certain percentage above the market). In some
countries this is bolstered by R&D and subsidies to consumers to support
specific technologies. The combination of resource performance standards
coupled with tax credits for green producers has some of the same benefits,
and may perhaps provide a greater market incentive by reducing the profit
insulation provided by assured markets to merchant producers. Likely, it
serves to lower the competition level with utilities which might otherwise
exist. But what these pro-production policies do not by themselves do is
mitigate the gobbling growth of power use of a mature industrial society.</p>
<p class="BodyText05SS" align="left" style="text-align:left;text-indent:0in">
Utility policy is unavoidably linked to the looming climate change crisis
through the need to reconcile these possibly contradictory incentives. It
would not be audacious to suggest that conservation and green energy could
be linked by a single new Federal policy tying efficiency credits and
renewable credits together, thereby assuring that potentially competitive
merchant suppliers could be a leading supplier of both. This has proven
very difficult to do at the fragmented state level, where, in addition to
everything else, environmental and energy representatives have arrived at a
series of different, and generally not adequately satisfactory, responses to
the issues of meeting new load in an environmentally responsive way.</p>
<p class="BodyText05SS" align="left" style="text-align:left;text-indent:0in">
Congress currently is being called on to consider two different types of
mandatory portfolio standard tradable credits: those for energy efficiency
and those for renewable energy. (They are Federal analogues of the “white
tags” and “green tags” voluntary programs which have sprung up.) Each has
carbon reducing characteristics. Perhaps this is an appropriate setting to
begin explicitly considering how energy efficiency and renewable energy,
provided in a competitive private capital driven marketplace, could be yoked
together through rewards mechanisms, even encouraged to be part of life
cycle resource planning by utilities and consumers alike. This would not be
easy; but it is preferable to superficially linking programs which can be
complementary or antithetical depending on how they are incented, and
effectively leaving the field to traditional technologies and players.
Utility regulatory policy is a specific context in which, if the twin
environmental goals of mitigation and adaptation can be reconciled, the
minimally productive push me - pull you policies of the present might be
supervened by a push here and pull there policy guidedog.</p>
<!--webbot bot="Include" U-Include="wv_bottom.htm" TAG="BODY" startspan -->
<hr color="#FFFF00">
<p class="MsoBodyText" align="left" style="margin-bottom:0in;margin-bottom:.0001pt;
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>
<!--webbot bot="Include" i-checksum="63395" endspan --></td>
</tr>
<tr>
<td width="25%" valign="top" align="center"> </td>
<td width="75%" valign="top">
<p align="center"><a href="#top">
<img src="../images/b-t-top.gif" alt="Back To Top" border="0" width="71" height="35"></a></td>
</tr>
</table>
</center>
<p align="center"> </p>
</body>
</html>