Bad idea watch, Ohio edition: counting natural gas combined cycle plants toward energy efficiency targets
Sometimes there are ideas that look innocuous at first glance but are actually quite bad. One I’ve heard recently: allowing Ohio’s electric utilities to count “efficient generation” toward their energy efficiency targets. Proposed at last week’s hearing on Governor Kasich’s energy bill by Sam Randazzo from the Industrial Energy Users of Ohio, the idea was earlier brought up by a couple of senators as they questioned those testifying.
I can think of at least three reasons why this is a bad idea.
First, this would allow Ohio’s utilities to get out of running energy efficiency programs that have helped customers cut their energy bills. Since 2009, these programs have generated cheap, clean energy savings: saving energy at less than one-third the cost of generating it in a power plant. Here’s a graphic from AEP’s recently approved 2012-2014 energy efficiency portfolio, just approved by the Commission, showing the comparative cost of energy efficiency and new sources of generation.
Energy efficiency is much cheaper than the alternatives.
Second, it’s unlikely that allowing utilities to count the construction of more efficient power plants toward their energy efficiency obligations will actually change a utility’s calculus toward more efficient generation. Utilities and competitive electric service providers are going to build combined cycle gas plants regardless of what policy Ohio puts in place. After all, it’s what they are already doing.
Finally, the idea completely misunderstands the public policy justification for energy efficiency efforts. Energy efficiency programs exist because there is a large pool of energy savings that we can capture at negative cost. This pool of savings exists because customers face barriers to making energy efficient choices. As my colleague Ralph Cavanagh writes:
“Decisions about efficiency levels often are made by people who will not be paying the electricity bills, such as landlords or developers of commercial office space. Many buildings are occupied by very temporary owners or renters, who are unwilling to make long-term improvements that would mostly reward subsequent users. And sometimes what looks like apathy about efficiency merely reflects inadequate information or time to evaluate it, as everyone knows who has rushed to replace a broken water heater, furnace or refrigerator.”
Energy efficiency programs exist to help customers overcome these barriers.
But a utility building a power plant doesn’t face the same level or type of barriers to making an energy efficient decision as Ohio's millions of customers and thousands of businesses. The utility certainly doesn’t lack knowledge about its options, and if it produces more energy from the same amount of fuel it is able to sell the extra into regional power markets.
What is this really about? If I had to guess (and I could be wrong), I’d say it’s yet another attempt by Ohio utilities to get out of their clean energy obligations. Remember the R.E. Burger Power Plant? FirstEnergy got legislators in Columbus to add an item to Ohio’s 2010 budget that would allow FirstEnergy to get multiple (potentially unlimited) Renewable Energy Credits for each megawatt hour of biomass energy produced from the power plant. The project, had it gone forward, would have meant FirstEnergy never would have had to invest in conventional renewable sources like wind energy.
FirstEnergy has shown an amazing ability, unique among Ohio’s electric utilities, to mess up energy efficiency program implementation. They may be seeking a means to “comply” with the law without having to actually change their behavior or learn a new skill. I have a better idea: if FirstEnergy is unable or unwilling to deliver energy efficiency programs in its service territory, let’s transfer at least part of its energy efficiency obligation to a competent third party. Northern Ohio’s electric bill will be lower, and its economy more competitive, if someone starts taking energy efficiency programs seriously.