Arkansas Electric Energy Law : Arkansas Electric Energy Lawyer & Attorney : Eric Hughes Law Firm : Wind & Solar Power, Distributed Generation : Arkadelphia, Little Rock, Pine Bluff

I recently read comments by Forrest Lucas, the owner of Lucas Oil (which has its name on the stadium where the Indianapolis Colts play), opposing the construction of a biomass generating facility in Crawford County, Indiana.  The article in the Louisville Courier-Journal by Grace Schneider quotes Mr. Lucas as saying, apropos of government-sponsored grants, property tax abatements, state incentives and federal tax credits for such facilities:

If these guys come in with their own money, it's one thing.  This is about America wasting huges sums of money. . .  This is not just about Crawford County or the state of Indiana.  It's not a good thing for the country.

which made me wonder if government (public) support for those developing industries is such a good thing.  Afterall I strongly believe, as the country at large does, that free market capitalism is best way to create national wealth and raise the standards of living for the greatest number of people.  I take from his comments that Mr. Lucas believes that, too.

But after thinking about it I concluded that public programs designed to support and encourage the development of alternative and renewable energy sources is a good thing.  There are three basic reasons for this conclusion:

• Public support for new technologies and industries, whether through tax policies or direct subsidies, have been utilized from the country's beginning to create a economic growth;
• Considering the significant public subsidies to fossil fuels, alternative and renewable energy sources suffer, at least partially, from an artificially created competitive disadvantage;
• Based on our ongoing need to develop clean energy and foster energy independence, no source of energy should be eliminated from the portfolio yet.

GOVERNMENT SUBSIDIES TO NEW INDUSTRY AND INFRASTRUCTURE HAS HISTORICALLY BEEN THE CATALYST FOR ECONOMIC GROWTH

Anyone with a smidgen of knowledge about the economic history of this country knows that free markets are aided and sustained by government rules and regulations, government investments, and government tax policies.  Certainly the Father of free market capitalism as practiced in the United States, Alexander Hamilton, understood that.  Just read Hamilton's First and Second Reports on Public Credit and his Report on Manufactures.  Likewise, the tariffs of 1816 and 1828 were taxes designed to protect and spur the growth of particular economic sectors.  That has been the case throughout the country's history.  In his book Bold Endeavors: How Our Government Built America, and Why It Must Rebuild Now, the investment bankerFelix Rohatyn eloquently describes some of the government programs upon which our free market economy is built:

• The Erie Canal
• The Transcontinental Railroad
• The Rural Electrification Administration
• The Interstate Highway System

There are other, but you get the idea.

RENEWABLE ENERGY SOURCES COULD COMPETE BETTER ECONOMICALLY BUT FOR THE GOVERNMENT SUBSIDIES TO FOSSIL FUELS.

Fast forward to today and consider the debate on government tax policies and other incentives that are designed to spur the development of alternative and renewable forms of energy.  Opponents of these forms of energy often say that they are too expensive, that the generating capacity of wind, solar, biomass and other forms of renewable energy would not exist without government subsidies.  That is undoubtedly true.  But here is another truth:  those forms of generation are at a greater competitive disadvantage than they would be if not for government subsidies to fossil fuels.

I once heard a preacher say there is nothing wrong with fishing with your kids on Sunday morning.  Fishing is a wholesome activity, and especially good if you are spending the time with your family.  However, he went on to say that an even better activity is spending that time with them in church.  Both activities are good; just one is better than the other.

The same principal applies to Arkansas's growing biomass industry.  Phoenix Renewable Energy is building biomass plants in Camden and El Dorado for the the production of wood pellets.  The pellets will be used in Europe for home heating and electricity production.  That is good.  Certainly those communities in South Arkansas can use the jobs and economic development that Phoenix is creating.  There may be an even better use for Arkansas's biomass potential, however.

We previously noted that Arkansas has the biomass potential to produce 150% of the state's residential electric needs.  Moreover, biomass is certain to have an increasing share of the U.S. electricity generation portfolio.  Why not utilize that fuel within the state, rather than importing fuel (coal) for electricity production, and exporting dollars?  Arkansans currently spend 10.1 billion annually for fossil fuel, a significant portion of which is fuel for the production of electricity.

The Arkansas Code, sections 14-206-101 through 14-206-112, permits Arkansas municipalities to acquire or construct, and operate, an electric public utility plant for the production, transmission, delivery, or furnishing of any public service.  Moreover, section 14-200-101 permits municipalities owning or operating facilities may extend service to rural areas contiguous to the municipality.  Municipalities in Arkansas with nearby biomass stocks, including timber and wood products waste, biomass feed stocks grown on marginal agricultural land, and even municipal waste, in conjunction with companies like Phoenix Renewable Energy, should consider municipal electric power generation and distribution.  The benefits are obvious:

• Local economic development -- through the construction and operation of facilities, as well as through the manufacture and installation of distributed generation systems made an integral part of a municipal electric utility.
• Keeping the money for fuel costs in the community -- rather than importing fossil fuel and exporting dollars, the money for fuel stays in the local economy.  Arkansas timber owners, loggers, and wood products manufacturers would have a ready market for what would otherwise be waste products.  Moreover, Arkansas farmers and landowners would have additional cash crops.
• More local control of energy production -- decisions about energy production would be made locally, rather than by entities far away without knowledge of local conditions and needs.
• Creating a sustainable community -- What industry wouldn't want to locate in a community with sustainable power production and what employees wouldn't want to relocate to an environmentally conscious community?
• Incentives for integration of smart grid technologies and distributed generation -- In a sustainable community, grass roots efforts at distributed generation could be rewarded through a net-metering policy that purchases any excess generation, rather than our current state system that is like a cell phone plan where you surrender the unused minutes.

Point to remember:  Lest you think municipal electric generation from biomass is a pie-in-the-sky proposition, read about the Joseph C. McNeil Generating Station in Burlington, Vermont.  That electric power generating station has been producing power from wood waste for Burlington for nearly 30-years.

A new Natural Resources Defense Council report, A Clean Energy Economy for Arkansas, argues that clean energy is a key factor for rural economic development in the state.  Some key facts underlying the analysis are:

• Each year Arkansans spend $10.1 billion for fossil fossil fuels.
• Which translates to $3,500 in energy costs for every person (not household) in the state.
• 78% of those energy dollars leave the state, never to return.

Arkansas ranks 13th in per capita energy consumption, and is expected to need 2,500 megawatts (MW) in new generating capacity over the next 15 fears.

The report cites a previous NRDC study indicating that "green jobs" primarily in construction, engineering, installation, agriculture, and operation of rural energy production facilities -- jobs which cannot be exported.  According to the report, clean energy investments 3.6 times more jobs for people without a college education, and 2.6 times more jobs for people with a college education, than comparable investments in fossil fuel energy.

The report goes on to examine

the potential for renewable resource development in Arkansas and finds unprecedented opportunity for long-term economic growth in rural communities as well as new income sources fro farmers from an array of emerging clean energy technologies, particularly wind, biofuels, biopower, and biogas.

 Wind Power.  40 of Arkansas's 75 counties have commercially viable wind resources.  A federal government study projects that 1,000 MW of generating capacity would create $830 million in economic benefits over 20 years, including 3,496 construction and locally stimulated indirect jobs and 504 permanent operations jobs.

Biofuels.  With its strong agricultural base, Arkansas is "perfectly situated to become a center for the next generation of biofuels production."  Existing Arkansas crop and timber residue are "sufficient to produce 770 million gallons of transportation fuels each year, equivalent to 50 percent of all the gasoline used in Arkansas.

Biopower.  The report points out that combining solid biomass with coal at existing power plants is a relatively low-cost way to ramp up renewable resource development.  "If 10 percent of Arkansas's coal-fired power capacity were replaced with biopower, more than 700 new long-term jobs would be created, not including new agricultural jobs to produce and harvest the biomass fuel."

Biogas.  Methane from decomposing manure has 21 times the global warming potential as carbon dioxide.  While Arkansas is one of the nation's leading livestock and poultry producers, it has no operating biodigesters.  "In addition to providing a potential source of revenue and energy for livestock operation, anaerobic digestion systems create high-quality fertilizer and other byproducts while reducing odors, water pollution, and emissions.

Important Point.  Even the Arkansas Energy Office recognizes the potential for producing electric power with biomass, estimating that Arkansas has sufficient biomass potential to supply 150 percent of the state's residential electricity use.

An interesting article in the December 2009 issue of The Atlantic magazine, Who Needs the Grid, reports on an old technology newly adapted to produce electricity cleanly and inexpensively:  fuel cells.  Bloom Energy has a power producing device -- called a Bloom box and about the size of a coffee table -- capable of powering a 5,000 square foot house.  The article, by Lane Wallace, reports that a five-kilowatt Bloom box has been used in an ongoing trial at the University of Tennessee, and,

has proved twice as efficient as a traditional gas-burning system and produced 60 percent fewer emissions.

Some of the article highlights are:

• The Bloom box has been in development for eight years with the support of a reported $250 million in venture capital.
• It is "fuel agnostic," meaning the boxes can be run on existing propane, natural gas, or ethanol sources, but can also be run on plant waste (biomass) or almost anything containing hyrdogen and carbon.
• The boxes operate independent of the power grid, critical for developing countries lacking infrastructure -- and nice for any consumer that wants to be free of its utility.

What Does It Mean?  One thing it means is that your local generating and distribution utility better get good at innovation.  If the ideas the utilities have expressed in the Arkansas PSC dockets on Sustainable Energy Resources, Ratemaking, and Energy Efficiency are any indication, they will be obsolete before they know it.

UPDATES:

Bloom Energy to Unveil Bloom Boxes Wednesday

Bloom Boxes Could Promote Economic Development in Arkansas

Bloom Boxes Unveiled by Bloomenergy

Energy law and policy are important issues in our time.  On the one hand, energy needs are projected to grow at an accelerating rate, taxing the supply of available energy resources and increasing our dependence on foreign sources of energy.   On the other hand, energy generation, transmission, distribution, and consumption contribute to climate change and have other adverse environmental consequences.  Supplying our energy needs now and in the future --at a reasonable cost and with the least possible negative impact on the environment -- is a challenge that confronts us all.

However, there are opportunities in these challenges, particularly in the field of electric energy.  While still small, the share of utility scale electric generating capacity taken by wind, solar, geothermal, biomass and other renewable and alternative sources of energy will only grow.  Even so, those sources of electricity generation currently have their own limitations, such as reliability for base load, along with siting and transmission issues.  While those alternative sources of energy hold out promise for the future, the current reality is that older and cheaper technologies for producing electricity, like coal and natural gas fired power plants and nuclear power, will be the primary sources of electric energy for the foreseeable future.  But some argue advances in clean coal technology and carbon capture and sequestration will reduce the environmental impact of those sources of electric energy.  Although, cap-and-trade legislation such as the American Clean Energy and Security Act of 2009 (Waxman-Markey), which attempts to impose the true costs of those dirtier technologies, could put renewable energy resources on an equal economic footing.

Moreover, new technologies in demand side management hold out the promise of increasing energy efficiency in ways that are both observable and measurable by the average electric energy consumer.  Advanced metering and smart grid technologies, coupled with appliances equipped with computer chips to communicate with the meter, and software to measure and report electric usage, will empower consumers to take more control over their own energy usage.  Those same technologies, including net metering, will increase the effectiveness of distributed generation systems like residential solar and small wind installations.   All these advances will change the consumer's relationship with their electric power supplier.  Thus, new regulatory and rate-making mechanisms must be studied, including decoupling of the rates electricity distributors charge from the amount of electricity supplied.

These are interesting times for electric energy law and policy, and Arkansas is at the forefront of confronting the challenges and capitalizing on the opportunities.  For example, the continuing fight over the location of SWEPCO's John W. Turk coal-fired generating plant in Hempstead County has implications for electric generation and transmission in Arkansas and across the nation.  And, with the location of LM Glasfiber and Nordex wind turbine blade manufacturing facilities in Arkansas, the alternative and renewable energy sector is contributing to economic development and job creation.

At the Hughes & Hughes Law Firm we have been following these issues with interest.  We want to be a participant with you in meeting the challenges of our time.  Therefore, this blog is designed to be a source for news and commentary about electric energy law and policy that effects Arkansas business, industry, municipalities, landowners, consumers, and others.  We hope you will join our conversation.