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Balance of power A Colorado group’s study indicates most of the chronic problems of generating more electricity can be eased with a larger emphasis on renewable sources

The Western Governors’ Association North American Energy Summit this year featured calls by New Mexico Gov. Bill Richardson and California Gov. Arnold Schwarzenegger to boost our region’s use of clean energy technologies and energy efficiency.

By Claudia Putnam
for Headwaters News

http://www.headwatersnews.org/perspective.html

Our leaders are right to be worried. By 2020, population pressure in the Interior West is expected to drive the demand for enough new electricity to power five new cities the size of Denver. The question becomes not whether we will meet this growing demand for power, but how we will do so.

Despite the governors’ clarion calls, most of the proposals on the table today would use coal and natural gas to meet the bulk of this demand. However, such a “business-as-usual” approach will add unnecessary risks, costs and liabilities to the region’s economic picture, and it will affect electricity bills of the region’s electricity customers.

As always, the cost impacts will fall most heavily on the biggest users: businesses.

These pie charts show how the region would generate electricity in 2020 under both the business-as-usual and balanced plan scenarios. In addition to the different resource distributions, the business-as-usual scenario is represented by what is essentially a much bigger pie–energy efficiency keeps power generation lower under the balanced plan. "CHP" stands for "combined heat and power," where heat and electricity are generated simultaneously at larger industrial facilities. http://www.headwatersnews.org/perspective.html

In some respects, a power grid based on fossil fuels has served our region well until now by providing cheap, reliable sources of electricity, although the environmental and public health impacts have been high.

However, going forward, a mix relying primarily on coal and natural gas will lose most of its advantages. Such an unbalanced portfolio exposes the region’s electricity buyers to a growing number of risks and liabilities, almost all of them economic in nature:

* Rising and unstable gas prices.

* Higher electricity costs from stricter air quality and climate change regulations.

* Drought-induced hydroelectric shortages that would require more reliance on costly natural gas.

* Adverse public health costs, including from asthma and other respiratory disorders.

* Damage to landscapes, water and air resources from energy extraction and production — leading to economic decline as western quality of life loses some of its allure.

Western Resource Advocates (WRA), a regional conservation policy group based in Colorado, has produced a new study, "A Balanced Energy Plan for the Interior West," that provides the first comprehensive look at what it would take to make a significant, regionwide energy shift.

For the first time, some of the risks listed above — long recognized by the power industry and by regional leaders as generally of concern — have been quantified. WRA framed its study in terms of three main questions:

What might a cleaner, more diversified system for the Interior Western states of Montana, Wyoming, Colorado, New Mexico, Arizona, Utah and Nevada look like?

What are the broader economic, risk-reduction and environmental benefits of a more diversified system?

What are the reliability and transmission implications of such a system?

Western Resource Advocates compared the business-as-usual scenario with a more diversified, balanced plan that projects 20 percent of electricity as coming from renewables by 2020 and assumes the adoption of an aggressive but reasonable array of efficiency measures.

The balanced scenario we created sought to do four things:

* Reduce and manage risk.

* Lower the cost of electricity generation.

* Reduce the environmental impact of power generation.

* Ensure transmission and generation reliability.

Using the same PROSYM power-system model frequently relied on by the electric power industry, we ran a side-by-side cost and benefit analysis of the two scenarios. They were each assessed for overall cost, risk management, transmission implications, and environmental and public health impacts.

The report accounts for the costs of adapting to new technologies, and even so, the Balanced Plan had significant advantages for electricity consumers and for the region’s business community.

Given that operating from a diversified portfolio is a common-sense approach to hedging risk, it’s not really a surprise that the Balanced Plan performed better across the board than the business-as-usual scenario. Compared to Business as Usual, by 2020, the Balanced Energy Plan would:

* Lower the costs of electricity production by $2 billion per year.

* Stabilize electricity costs due to a decreased reliance on new natural gas.

* Save the region $2.5 billion per year if natural gas prices are higher than expected.

* Save the region $4.9 billion per year in the event of stricter future environmental regulations, particularly climate-change regulation.

* Reduce smog- and haze-forming pollutants by 30 percent, and carbon emissions associated with global warming by 40 percent. These decreases will lower risks and costs and liabilities associated with increased health-care expenses and liabilities, and quality of life issues that can affect the ability to attract and retain a high-quality workforce.

To develop its models and generate data, WRA employed Synapse Energy Economics and the Tellus Institute. Each is known for its high-quality consulting services in energy, economics and the environment. In assessing the potential for renewables and efficiency for the region, WRA relied on two previous studies.

WRA’s own Renewable Energy Atlas of the West, available at http://www.energyatlas.org, inventoried the availability of wind, solar, biomass, and geothermal resources across the West on a state-by state basis, after unrealistic, inaccessible, or environmentally unsuitable sites were screened out. The Southwest Energy Efficiency Project’s report, The New Mother Lode: The Potential for More Efficient Electricity Use in the Southwest, provided a detailed analysis of opportunities for efficiency.

In modeling the risk of future gas prices, WRA used conservative estimates that are lower than some of the prices we are seeing today. Our estimates of costs associated with future carbon regulations fall in the middle range of recent studies projecting those costs and are in line with those beginning to be reflected in utility planning processes across the region. For example, PacifiCorp, one of the region’s leading utilities, now adds $8 per ton to its assessment of the cost of coal when it plans for new energy supplies.

This graph shows the reduction in key pollutants under the Balanced Plan, relative to both the business-as-usual 2020 scenario and today’s levels. Note that carbon, the primary contributor to global warming, would drop by about 40 % relative to business-as-usual. http://www.headwatersnews.org/perspective.html

While the study focused on the impacts of a balanced plan on the Interior West, we also used data from existing sources to model transmission and demand in relation to the Pacific Northwest and California. This reflects the interconnected nature of the Western power grid, as well as the fact that much of the electricity produced in this region is exported, particularly to California.

The report highlights a number of positive steps already taken in the region, in both the private and public sectors. For example, IBM purchases energy from renewable resources to help stabilize its electricity costs. As mentioned above, PacifiCorp, a large regional utility, has begun to recognize the economic risk of future environmental regulation in its planning process. Alcoa has invested in energy efficiency to reduce its operating costs, and PPM Energy has turned to renewables development as a business strategy.

In addition to the statements by Govs. Richardson and Schwarzenegger, other encouraging public initiatives include the Renewable Energy Portfolios adopted by several states, including Arizona, New Mexico, and Nevada, and the similar ballot initiative that is expected to go before Colorado voters this fall. These standards ensure that a significant percentage of the new electricity consumed in these states will be generated from renewable resources.

The Balanced Energy Plan will help maintain the region’s high quality of life and help secure a stable, healthy economy. But whether the Interior West achieves a balanced energy future depends on thousands of decisions made by utilities, independent power producers, businesses, utility customers, state regulators, legislators and many others.

Western Resource Advocates hopes this report will help inform these decisions by making clear their associated risks, costs and environmental impacts, and that it will foster a regional dialogue on the stakes involved in our energy future.

These decisions are more likely to coalesce and move us toward a secure energy future if there are opportunities for regional discussions about our energy choices. Because the region’s large businesses face the greatest risk exposure under the business-as-usual scenario, we think they have the most to gain by studying and advocating for a more balanced plan.

A Balanced Energy Plan for the Interior West is available online at http://www.westernresourceadvocates/energy/bep.html
Claudia Putnam is communications director for Western Resource Advocates, a solution-oriented conservation law and policy group headquartered in Colorado.

produced by Shellie Nelson, assistant editor
contents copyright 2004 | Headwaters News

Headwaters News is a project of the
Center for the Rocky Mountain West
at the University of Montana.

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