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

The Challenges Ahead  Posted: April 18, 2009

“The Challenges Ahead”
Keynote Address to Environmental Quality Commission’s
2009 Earth Day Awards
Frankfort, Kentucky April 17, 2009


Thank you for this opportunity to be a part of the ceremonies honoring and recognizing the contributions of this year’s Earth Day Awards.

This is a time of great crisis and great opportunity. We have reached an important point in Kentucky’s energy and utility policies, standing with one foot in the past where adding value for the coal industry was the preeminent political concern, and the other at the threshold of a carbon-constrained future in which a dramatic shift in how we produce and consume energy is needed to avoid catastrophic social, environmental, and economic consequences.

It is a future that demands that we account more honestly for the costs of our energy choices, that we reevaluate our production and wasteful utilization of energy and that we invest in energy strategies and choices less damaging to the land, air and water of our Commonwealth, and more capable of sustaining an economy and quality of life over the long term.

There is general consensus within the scientific community that emissions of greenhouse gases should be reduced by 60-80% by mid-century to minimize irreversible effects of climate change. There is also general scientific consensus that we have a relatively brief period in which to restructure the manner in which we produce and consume energy, before the exigencies of climate change will impose even more dramatic costs on our communities and our economy and narrow our options to mitigate, rather than adapt to, climate change.

We in Kentucky are “ground zero” on climate change. As a state that both produces a significant amount of coal and which is 98% dependent on coal and other fossil fuels for electricity, and as the 46th poorest state in the Nation, the implications for Kentucky of the coming national carbon mandate, such as that proposed in the Waxman-Markey or the Lieberman-Warner bill or several others now pending before Congress, will be significant. Kentucky ratepayers will see significant increases in electric rates as utilities seek to recover costs associated with reduction in carbon emissions or internalization of carbon costs. The sticker shock, and the potential adverse effects on the most vulnerable ratepayers who are clinging by their fingertips to homes and rental units and spending up to 23% of their income just to provide warmth in the winter, and on our major manufacturers, many of whom are signfiicant energy users and who are very price sensitive to utility costs, 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. With an aging fleet of coal-fired power plants, the cost of retrofitting or replacing that power to meet carbon targets is a daunting task indeed.

Just as the overwhelming weight of the scientific community acknowledges climate change as a phenomenon, there is growing consensus in the business community and in local governments, as well as Congress, on the need to reduce greenhouse gases. The debate is no longer whether we should slow, stop and then reverse loading of greenhouse gases into the atmosphere, but is how quickly we should move and how the costs should be allocated. We don’t have until 2020 to take action, for as the Climate Action Partnership noted in its “Call to Action”:

each year we delay action to control emissions increases the risk of
unavoidable consequences that could necessitate even steeper reductions in the future, at potentially greater economic cost and social disruption. Action sooner rather than later preserves valuable response options, narrows the uncertainties associated with changes to the climate, and should lower the costs of mitigation and adaptation.

In the 2007 Special Session and the 2008 Regular Session, the General Assembly took several very important steps towards a rational energy future, commissioning a report on carbon emissions, research and strategies; creating a center for renewable energy and energy efficiency; requesting a study on reform in utility regulatory policy; enacting a set of incentives for renewable energy and energy efficiency; and using the financial clout of the state to set the bar much higher on the performance of state-funded buildings.

It took the hard work, vision, and leadership of Majority Leader Adkins, and his “co-conspirators for change” – Reps. Moberly, Pasley and Pullin, along with House Leadership and the Senate partners who helped shepherd House Bills 1 and 2 and other energy-related measures through the Senate – Senators Stivers, Jensen, Harris, and Leeper.

The Beshear Administration has engaged on the issues of energy and the environment, producing a thoughtful strategic plan and actively recruiting partners in academia and industry to help build the new energy economy for Kentucky.

We have some basic needs going forward.

First, and foremost, we need honesty and transparency. Honesty in how we measure the value and costs of our energy choices and transparency in how we account for those costs.

It is increasingly apparent that the manner in which we have defined “cost” and accounted for, or failed to account for, elements of that cost has had dramatically negative consequences, and the bill is coming due for the failure to have fully costed our energy choices. What will happen under a carbon tax or cap-and-trade system is that carbon will be “monetized” and Kentucky will be in the marketplace competing with states far less dependent on coal-fired power.

All energy choices have a footprint and need to be viewed comprehensively on a life-cycle basis, considering such issues as the potential conflicts between food and fuel, and energy production and other land uses. In order to bring honesty to energy choices, our utility policies must include health, environmental and social costs from consideration in pricing energy. We need to provide additional meaning and depth to resource planning, in order to more fully value efficiency and pollution in our choices for energy.

Historically, environmental costs have been considered externalities. These historic “externalities” have a nasty way of eventually becoming internalized in ways that are less efficient and more costly to the ratepayers, as add-on adjustments for particulates, mercury, SO2, and now CO2. Utility resource planning processes that fully cost the fuel choices and energy approach in life-cycle terms will more honestly value fuel diversity, congestion relief, reliability enhancement, environmental and cost-savings benefits that clean energy and energy efficiency provide.

It’s important that we face the issues and not lapse into denial. While the coal industry historically likes to lay blame elsewhere, whether on Congress, God, or a broader conspiracy, we are not victims of some conspiratorial scheme to transfer wealth to the coasts. We are instead reaping the bitter harvest of energy policies that have failed to fully cost our fuel choices.

That is the bad news. The good news is that we have opportunities to retool our economy and our Commonwealth and nation in order to more responsibly address energy needs and to better live within our “means.” The first step is to invest in energy efficiency and to diversify our energy portfolio to include an array of renewable energy sources.

If we are to chart a rational energy path, we need to put to rest certain myths and misconceptions.

We need to dispel the myth that “opportunities for renewable energy in Kentucky are limited.” In fact, there is a significant potential for greater deployment of renewables, including some 800 MW of hydropower potential on existing locks and dams on the Ohio and Kentucky Rivers and major lakes in the state, and a largely untapped opportunity for solar hot water, solar PV and solar heating and distributed generation in the residential, commercial, institutional and industrial sectors the Commonwealth. Wind power capacity expanded by 45% in 2007 alone, with 5,244 MW installed nationwide. DOE reported that an ambitious program of investment in wind could provide 20% of the nation’s electricity by 2030. Kentucky should be investing in renewables – in production, in the manufacture of components, and in the training of researchers, scientists and engineers to help advance the technological improvements needed to more efficiently harvest renewable energy.

We need to put to rest the myth that we can “balance” environment and economy - we cannot sustain an economy unless we live within our ecological means.

There are opportunities for the Commonwealth both to mitigate the impact of the carbon mandate, and to retool our economy for a carbon-constrained world. The most important area in which state investment can help hedge against the near-term impacts of a mandatory carbon reduction program is energy efficiency. According to several studies, investment in many cost-effective technologies can reduce consumption by 25-30% over the next 20-25 years. 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 and to buy important time as the framework of the carbon mandate is constructed and as technological improvements in the capture, conversion, and management of various fuels are refined.

And there are abundant opportunities to mine out inefficiencies on both sides of the meter. According to the Energy Information Administration, 67% of the 41.8 quadrillion Btus of energy consumed for electricity are lost – 3% in line losses, the remainder in waste heat.

Kentucky’s use of energy is wasteful because it has historically been artificially cheap. Kentucky’s electricity rates remain 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.

There is a tremendous untapped potential in all sectors for greater efficiency. And there has never been a better time to combine a workforce in need of meaningful employment opportunities, a housing construction sector facing significant hurdles to new construction, an economy reeling from energy volatility, and an atmosphere desperately in need of a reduction in carbon loading, into a comprehensive program to retrofit housing stock across the commonwealth for efficiency and clean energy. Patterned after the national Clean Energy Corps proposal, and under the leadership of Secretary Miller, the Beshear Administration has moved forward decisively and creatively to develop a Clean Energy Corps program that will leverage state and stimulus financing, university support, and job creation and training programs and attract private investment to spur a statewide effort to retrofit existing housing stock for efficiency and renewables. With the poorest of our brothers and sisters paying 23% of their income just to stay warm and cool, it is an area where our collective conscience cries out for action.

In House Bill 1, the General Assembly sent a clear message – until a utility has demonstrated that all cost-effective DSM strategies have been deployed, including investment in energy efficiency, no new capacity should be approved. It is time to codify that principle into the Public Service Commission’s statutory mandate, and to make demand management the first step, so that ratepayers are not asked to shoulder the burden of new capacity until efficiency measures have been fully deployed. Energy efficiency investment, coupled with deployment of renewables, will buy critical time and allow avoidance of risky investments in new coal-fired base load or expensive natural gas-fired supply before the carbon targets and timeframes are adopted and strategies developed to manage the carbon.

In House Bill 2, the General Assembly asked the administration to produce recommendations on a renewable portfolio standard (RPS). It is my hope that the Beshear Administration will lead in helping spur investment in renewables and efficiency by creating market demand for renewable-generated power through adoption of a mandatory Renewable Portfolio Standard.

Stable and sufficient funding for means-tested energy efficiency programs through adoption of a public benefits fund is essential to any real investment in such programs. A one mill (1/10th of one cent) per kilowatt hour dedicated to low-income efficiency efforts and housing retrofits would generate a significant fund, at a nominal cost of around $1 per year per customer, saving that customer far more in avoided “poverty costs” and in avoided power generation costs.

As we transition away from reliance on fossil-fueled power, there will be a continued need for use of coal as a bridge fuel. But it is important that we understand that so-called “clean coal” isn’t. The new generation of coal-fired power plants that are in planning and under construction are not the solution, nor is gasification or liquefaction of coal, since the sequestration of carbon is an as-yet unresolved problem with any conversion technology for coal. While the new generation of plants may be more efficient that the old, it is important that we look towards more sustainable approaches to power generation and consumption. Margaret Mead was right – “It may be necessary temporarily to accept a lesser evil, but one must never label a necessary evil as good.”

Kentucky's greatest challenge is how to prepare for the inevitable transition from an economy that has been powered by extractive industries and low-cost electricity, to an economy that can better sustain and meet the needs of all of our state's residents, and remain competitive in a regional and global economy while more fully accounting for the ecological costs of resource extraction, energy generation, and industrial production.

For many counties in eastern and western Kentucky, the state of the environment is inextricably intertwined with extraction of coal, oil and gas, and how the costs associated with that extraction, beneficiation and transportation are accounted for. As an activist in 1972, the year that the Kentucky General Assembly passed in special session the bill that created the Environmental Quality Commission, I cut my teeth in lobbying for what would become the 1977 Surface Coal Mining Act.

It is unfortunate that the implemented law has failed to accomplish what Congress intended. The rich human and ecological capital of the Appalachian region is being squandered by mining methods that impoverish human and ecological communities. The twin promises that mining would be a temporary use of land and that full protection would be accorded coalfield citizens, have been honored in the breach.

Our challenge is to utilize existing tools in local, state and federal law, and where necessary to craft new tools, to demand full accountability from the coal industry during this transition period for the footprint they leave on land and water resources and on community safety and health. The footprint of coal extraction, in terms of area disturbed and land and water resources diminished, is much larger than it should or could be.

Today we gather to pause from our work, to celebrate each of this year’s Earth Day Awards recipients. Like the protagonist and the Doctor in Camus’ The Plague, we step outside of the walls of a society afflicted by crises, to renew ourselves in fellowship.

Just as we are each a part of the problem, this year’s recipients, and indeed all of us, can be an important part of the solution. Your voice, your actions, can help to create the changes needed to foster a more just and sustainable community. You are the smart grid of the future, and you have got power - as consumers, as voters, as citizens, as mentors, as students, as participants in electoral politics and in developing governance policies.

Margaret Mead was right, when she said “never doubt that a small group of thoughtful, committed citizens can change the world; indeed, it's the only thing that ever does!” Our recent history is replete with examples of how people of good will can become so much more when working together as co-conspirators for positive change. You, and your works, are evidence of that.

How do we build a more sustaining, a more just political and economic environment? As Mother Teresa told the interviewer who wondered how she persevered in the face of overwhelming need, that she did it "one soul at a time.” Never despair that your efforts are too small; too little to make a difference. We each have the ability each day to live more mindfully and to help others to do so.

* Be creatively intolerant of injustice and mediocrity. We are blessed at this time of crisis to have a working team of individuals in charge of our energy and environmental cabinet who have the “right stuff” to help us transition to the new energy economy. Dr. Len Peters brings a skill set to that position forged in both academic training and experience on a national and international scale with both energy and environmental issues. Henry Clay List brings to his role as deputy a pragmatism borne of his legislative experience, an understanding of the price sensitivities of many of our manufacturers from his years working with AIK, and the working knowledge of a unique industrial sectors from his experience at KU. They are joined by a senior management team that give us excellence on most days, far more than we have a right to expect – and some of them are here today – John Lyons, Don Dott, Leah MacSwords, Jennifer Thompson, Carl Campbell and some who could not be here, Bruce Scott, Sandy Gruzesky, Pete Goodman, Karen Wilson, Tony Hatton, John Davies, and others.

They need and deserve your wholehearted support, for we give them less than 1% of our state budget yet expect that they will, short-handed and underpaid, protect the very building blocks of our economy – our land, our air, and our water resources.

* Approach problem solving with an open mind, since it is in dialogue, in engagement, that we arrive at solutions.

One of the enduring values of the Environmental Quality Commission is that is brings together a diverse group of stakeholders – from agriculture, industry, government, the consulting sector, the public, and the conservation community, to create an informal forum for discussion outside of the stilted world of administrative rulemakings and adjudicative proceedings. The opportunity for that informed dialogue is priceless, for it is in the crucible of open, honest, collegial conversation that we find solutions and create effective change.

* Stay involved, for above all, the day belongs to those who show up, and who keep showing up.

Let us aspire to be less acquisitive, less aggressive in our relationships with each other and our environment. Let us face our tomorrows with hope and humility and continue together in struggle and in fellowship to improve the environmental legacy we will leave to our children’s children. Congratulations again to this year’s Earth Day Award Recipients.

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