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

3rd Energizing Kentucky Conference Focuses on Kentucky Energy Plan and Role of Educational Institutions in Meeting Energy Challenges  Posted: May 11, 2009

Third Energizing Kentucky Conference
Lexington Hyatt Hotel, April 15, 2009

Panel Discussion on Beshear Administration Energy Plan
“Intelligent Energy Choices for Kentucky’s Future”

Dr. Shinn, fellow panelists, good morning. I appreciate this opportunity to express my thoughts regarding the Beshear Administration Energy Plan.

If you had suggested to me in 2006 that the Kentucky General Assembly would come together in a special session in 2007, and in regular session in 2008, and pass two significant pieces of energy legislation that would recognize climate change as a significant driver in Kentucky’s environmental and economic future, and would begin the arduous task of armoring Kentucky against the coming carbon mandate, I would have told you it would not happen. Yet it did.

I appreciate the engagement of the Beshear Administration on energy issues, reflected in the development of the strategic plan. While there are aspects of the plans with which I take some exception, the plan is laudable in recognizing Kentucky’s great challenge of adapting and thriving in a carbon-constrained world.

We are ground zero for climate change. The 46th poorest state in our Nation, 98% dependent on fossil fuel for our electricity and possessing an aging fleet of coal and petcoke-fired power plants. We have but a brief period of time in which to act to blunt the sticker shock that will attend the internalization of carbon-costs associated with the emissions from those plants. The daunting task of achieving 50% capture and sequestration for existing power plants by 2025 assumes a significant capital investment in scrubbing, storing, transporting and disposing of carbon from power plants that are neither designed nor equipped to do so.

There is much that is progressive in the plan -- the emphasis on efficiency reflected in Strategy 1, the emphasis on renewable energy sources in Strategy 2, and the recognition of greenhouse gases as a major driver in energy policy moving forward.

We are emerging from an era where our national energy policy was largely supply sided – one wag called the Bush-era energy policy the moral equivalent of his and VP Cheney’s portfolios – to a recognition that it is not about generating more power, but about the quality of life and provision of energy services.

The few bones that we have to pick with the plan relate to the under-emphasis of the contribution that renewable energy sources can make towards meeting Kentucky’s energy needs, and the over-emphasis on the role of coal-to-liquid technology and nuclear energy.

Coal to liquids won’t happen, outside of the few sectors that are not price-sensitive in fuel choice, absent a floor subsidy on petroleum to assure that investments will not be stranded by market manipulation, and absent breakthroughs in sequestration of the excess carbon. Outside of small-scale sequestration associated with tertiary oil and gas recovery, CCS remains more theoretical than real.

Strategy 7 suggests that nuclear power will be an important and growing component of the nation’s energy mix. Nuclear power, now some 20% of the nation’s energy mix, will not grow in market share unless the industry comes to terms with the substantial costs relative to energy from other sources; the issues of proliferation, and of long-term waste management. Outside of the addition of units at existing plants, and repowering of existing units, the substantial costs associated with new plant construction will hinder significant new private investment, despite substantial government subsidy and liability protection.

In the short term, investment in energy efficiency is key to moderating increases in utility bills and to providing Kentuckians with a handle on managing their energy needs. Coupled with a significant investment in diversifying our energy portfolio to include more renewable sources, we can both anticipate and moderate the sharp spike in electricity costs that will occur as carbon is monetized and the overdue bill for the real cost of fossil-fueled power comes due. The energy plan significantly underestimates the contribution that both hydro and solar can make. There is an estimated 800 mW of hydro potential flowing over and (in the case of the Kentucky River, through) the dams on the Green, the Kentucky, the Cumberland and the Ohio Rivers. Kentucky has solar potential equal to and greater than European countries who are looking to solar power as a key strategy to meet their energy needs.

As with any policy, it is implementation that is key. KRC had hoped that we would, in the 2009 session, build upon the successes of House Bills 1 and 2, yet the session saw no progress in energy policy. The Administration’s bill lacked a meaningful renewable and efficiency portfolio standard, and contained goals regarding coal conversion technologies that were unrealistic and unaffordable. We were unable even to reenact House Bill 2, which has been highlighted as model legislation by the Council for State Governments. The session was one of opportunity lost at a time when we can ill-afford to let opportunities pass.

A “Clean Energy Corps,” a concept adapted by KRC from Van Jones, has been in turn embraced and developed by the Beshear Administration. Finance Secretary Jonathan Miller and his able staff are moving forward in an exciting public-private partnership that promises to provide low and moderate-income households greater efficiency and lower utility bills. To learn more, go to http://finance.ky.gov/cec.htm.

In closing, let me express my appreciation to the four Presidents for their ongoing commitment to engagement on energy policy matters, and to Secretary Peters, Karen Wilson, John Davies and the Energy and Environment Cabinet employees, for their efforts to advance responsible energy policy. We could not have a better executive branch team to partner with Representative Adkins and other legislative energy leaders at this critical time than Secretary Peters, who brings a wealth of experience in both academic and applied energy fields, and Deputy Secretary List, who brings over thirty years of understanding of the process of governance. We look forward to working with the Beshear Administration and the legislature to advance legislation and a budget for 2010 and beyond that will move us decisively towards a clean, reliable, affordable energy future.

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