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Kentucky Resources Council, PO Box 1070, Frankfort, KY 40602 Phone [502] 875-2428

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PO Box 1070, Frankfort, KY 40602  Phone 502.875.2428, Fax 502.875.2845

Draft Plan For Center For Renewable Energy Flawed  Posted: November 13, 2007
November 12, 2007

To: Dr. Talina Matthews

From: Tom FitzGerald, KRC

Re: Draft Proposal for Center for Renewable Energy Research and Environmental Stewardship

I have reviewed the draft proposal prepared by Western Kentucky University President Gary Ransdell for creation of a Center for Renewable Energy Research and Environmental Stewardship. KRC has also reviewed the comments provided by Marc Isaacs of Legacy Homes, Geoff Young, Wallace McMullen, Rick Clewett and Andy McDonald, and supports those comments.

As your email noted, the “intent of the General Assembly” as expressed in Section 55 of the bill, was to establish a collaborative to develop a plan for creating a “Center for Renewable Energy Research and Environmental Stewardship,” whose mission is to “provide leadership, research, support, and policy development in renewable energy, to advance the goal of sustainable energy and to promote technologies, practices, and programs that increase energy efficiency in energy utilization in homes, businesses, and public buildings.”

The planning collaborative was to include the state universities, KCTCS, the GOEP, and any other stakeholders, including other colleges, energy producers, business groups, energy conservation organizations, and consumers. In developing the plan, the Conference of Presidents was to collaborate with the entities listed in Subsection (1) of the bill and any other identified stakeholders “to solicit input and recommendations” and in developing proposed strategies for the center, to specifically consider two sources of recommendations – those policies in the Governor’s Comprehensive Energy Strategy related to renewables and energy efficiency, and the Task Force on Energy Efficiency recommendations.

l. Paragraph 3 of the draft report indicates that the plan was developed with ‘collaborative input” from stakeholders. I am unaware that any input has been solicited from those of us who have for decades represented low- and fixed-income energy consumers, energy conservation or environmental interests. Your November 2 request for review by November 9 was the first communication I have received on a collaborative planning process enacted in August.

The intent of the legislation was to actively involve the stakeholders listed in subsection (1) in providing input and recommendations, and unfortunately, we are instead requested to review under a 7-day turnaround, the already-developed draft plan.

I would appreciate receiving a list of all “stakeholders” and a description of any collaborative input that has been sought other than the November 2 request to review the draft plan. To the extent that there has not been such collaborative input prior to November 2, I believe that paragraph 3 should be revised to reflect that stakeholder review was sought from the conservation and low- and fixed-income consumer community after the draft plan had already been developed rather than input being solicited during the plan development.

2. The “background” section should be rewritten to focus on the mission of the proposed new Center. The relative percentages of utilization of fossil fuels and renewables for production of energy, and the role that efficiency measures can play, are not static, as the use of EIA predicted trends would lead the reader to believe, but are responsive to investment and tax policy, education, and other measures that affect the viability and rate of deployment of energy sources and their utilization. A range of estimates for renewables and for coal, more consistent with the research provided by the National Academy of Sciences, MIT and other sources, should be provided for both coal and other energy sources.

Additionally, the mission of this Center is not limited to “energy production and consumption” as the first paragraph states, but is to focus on renewable energy and energy efficiency.

The background section, rather than focusing on the structure and mission of the center, appears to have already reached a conclusion that certain forms of renewable energy (i.e. solar and hydro) are in decline or are not worthy of investment or research, when the trends are quite to the opposite. There exist significant opportunities for deployment of more mature renewable technologies, such as hydro, in this Commonwealth, and the cost of solar hot water and solar PV systems are declining. Wind energy has also made significant strides and is approaching cost competitiveness with fossil-fuel powered electricity despite a relative paucity of incentives (economic and otherwise) compared to the significant subsidies provided to coal-fired electricity. The Center should focus on the development and deployment of all renewables, rather than narrowing the focus of the center from the start.

3. KRC is very concerned that, throughout the plan, the focus appears to be limited largely to industrial “economic development” in the most narrow sense and appears neither to understand or appreciate that our almost complete dependence on coal-fired electricity creates a significant vulnerability for all sectors of our economy that renewables and efficiency can help reduce and alleviate. Our daunting task is to remain “competitive” in an economic environment where energy sources are more realistically “priced,” that is, where the life-cycle costs of production, transportation, utilization, and waste disposal (and particularly the costs of GHG emissions) are increasingly required to be internalized rather than shifted into the public domain. Our lack of preparedness to respond to the coming national carbon reduction mandate is our greatest economic vulnerability, and the Center for Renewable Energy and Environmental stewardship was intended to focus on R&D and deployment of renewables and efficiency as part of a strategy to assist in mitigating the potentially dramatic impact on Kentucky’s ratepayers and citizens. Our economic growth and energy utilization rates are not sustainable, and as the bill comes due in the forms of mercury, fine particulate, GHG and other emissions requirements, energy sources and strategies (including efficiencies) that have a lighter footprint and can provide and support a sustainable economy, should have a center focused on the advancement of those strategies.

Nationally, coal provides around 49% of the nation’s electricity. In Kentucky, coal provides 97 and 98% of the LGE and KU profile and somewhere around 90% overall. What has historically been our economic strength is becoming, in a carbon-constrained future, our vulnerability. The inevitable mandatory program for emissions reductions will hit hard on Kentucky’s ratepayers because we are so unprepared. Our regulated coal-fired power plants will be obligated to internalize carbon costs, either by retrofitting the existing fleet with post-combustion OC2 scrubbers to capture and sequester carbon, by purchasing carbon credits, or by deploying new base-load plants that offer more efficiency or more effective carbon capture. The sticker shock, and the potential adverse effects on the most vulnerable ratepayers and on our economy, if we fail to plan now and to invest now in a strategy to reduce carbon emissions from the combustion of coal for electricity, will be staggering. The research funds for the CAER and KGS were intended to address those issues, as was the required carbon report due at the end of this month.

The CREES was intended to address the most important areas in which state investment could help hedge against the impacts of a mandatory carbon reduction program - energy efficiency and renewables. Investment in improving efficiency of conversion and use of energy offers a way to “mine” inefficiencies in the way that power is generated and consumed. Kentucky’s electricity is relatively low-cost, but our bills certainly are not, because we consume power inefficiently. In 2005, there were 20 states with lower monthly residential electricity bills than Kentucky’s. In that year, Kentucky’s residential ratepayers consumed more electricity than our counterparts in 43 other states; our businesses, more than 19 other states and our industries, more than counterparts in 47 other states. Efficiency improvements are a key to creating a sustainable Kentucky economy, and generate good jobs, increase disposable income, keep money circulating in the state, and make our industries and products more cost-competitive in the world market. Reducing waste, upgrading building codes, creating incentives for energy efficient home construction and renovation, enhancing demand management programs to encourage utilities to invest in more efficient use of power by customers, and increasing weatherization programs, particularly for rental housing – all of these are areas that a center focused on renewables and efficiency should highlight as priorities.

The strategic plan should be to identify the energy demands and needs of Kentuckians in all sectors, and to help advance use of renewable energy and efficiency in all sectors as a way to build a sustainable economy and environment. It should not be narrowly focused on serving industrial clients (p. 4), competing for federal grants (Id.), and supporting the industrial base (Id)., but instead should recognize the inefficiencies and needs in the residential, commercial and institutional sectors and should more broadly seek to fulfill the mission outlined by the General Assembly.

4. KRC shares the concerns voiced by the other commenters that the list of collaborative partners fails to include representation from the environmental, conservation, low- or fixed-income consumer communities, and from renewable energy providers. This glaring omission will result in decisions made without input from those constituencies.

5. Coal has no place in the proposed center, “clean” or otherwise. Fossil-fuels are not within the scope of renewable energy under HB 1 (an intentional change from an earlier version of the bill that included coal conversion technologies within the definition) and the dilution of the funding for the CREES of 20% of the initial proposed funding to the “Center for Clean Coal Energy” is inconsistent with the mission of the Center and with any fair definition of renewable energy.

6. Finally, the draft plan does not appears to have considered the recommendations of either the Governor’s Comprehensive Energy Strategy relating to renewable energy and energy efficiency or the Final Report and Recommendations of the Task Force on Energy Efficiency, which were to have been considered in development of the plan. Had those recommendations been considered and incorporated, the focus would not have been as narrowly drawn. The final plan should consider and address those recommendations, with appropriate footnotes identifying how those recommendations were either incorporated into the plan or the reason(s) for rejection of those recommendations.

Thank you for the opportunity to review the draft plan.

Cordially,

Tom FitzGerald
Director


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