Ky. Voices: Unique state, unique energy solutions

Huge power needs of manufacturing key to economy

July 14, 2013 

President Barack Obama's June 25 announcement to address emissions of carbon dioxide from power plants didn't take anyone by surprise. We still don't know what the rules will look like, nor do we know what the implementation timelines will be. What we do know, however, is that existing coal-fired units will be part of the regulatory scheme.

In a state that relies on coal for more than 92 percent of its electricity, this is a challenge.

We've anticipated that this day would come. We've done more than anticipate; we've been planning. Gov. Steve Beshear's 2008 energy plan called for a diversified portfolio. The plan noted that "Kentucky's challenge for the 21st century is to pragmatically adopt inherently cleaner, newer energy sources as well as innovative uses of traditional sources."

We noted, too, that federal policies would have an increasing influence on the state, and that our doing nothing was not acceptable.

The governor organized the Energy and Environment Cabinet and charged us with primary implementation of his plan. And that is what we have been doing. Some people want to measure our success on only one outcome: the imposition of a renewable portfolio standard (RPS). They see that as the simple and only tool to diversify our electricity portfolio.

Beshear's vision was much broader, and also much more realistic. We didn't call for a mandate for one primary reason: setting a mandated RPS that would lead to artificially higher electricity prices was not in the best interest of Kentucky's citizens. States that have mandated an RPS have done so primarily because such a standard did not put them at an economic disadvantage.

We've recognized Kentucky's per capita carbon footprint — at 50 percent higher than the national average — as a vulnerability and have implemented programs to help us reduce our greenhouse gas emissions in all sectors.

An overarching theme of these initiatives has been our obligation to address greenhouse gas emissions in a meaningful and affordable manner. We convened the Biomass Task Force, Kentucky Climate Action Plan Council and the broad, stakeholder-driven initiative, Stimulating Energy Efficiency, because they bring together citizens, businesses and others who are affected by our energy choices to help shape policies that work for Kentucky.

We invested more than $78 million in federal stimulus funding into efficiency programs and initiatives to expand renewable resources. We targeted efforts that would have long-term benefits beyond the funding stream itself. We've taken the same approach with expenditures of settlement funding from a Tennessee Valley Authority-Environmental Protection Agency consent decree.

Our energy efficiency programs are among the best in the nation. Kentucky state government received an Energy Star partner of the year award in 2012, the first time the EPA recognized any state government for such an award. We've recognized this as our most important tool to address our energy challenges, and it helps households, school districts and businesses save money. As electricity prices increase, these programs become even more valuable.

One segment of our economy that poses challenges in the efficiency arena is our large energy-intensive industries. Manufacturing accounts for more than 200,000 jobs statewide and represents close to 20 percent of the state's GDP. It is also extremely vulnerable to electricity price increases.

Kentucky is unique — we are the single most electricity-intensive economy in the nation; that is why we have struggled so much with the delicate balance between looking at options to diversify our electricity portfolio and maintaining affordable electricity prices.

It doesn't mean we've been profligate in our energy use; it means we've been able to attract energy-intensive industries that help us supply the materials, automobiles and other manufactured goods that are used in more service-oriented economies such as California and New York. Not all states look the same, nor should they.

Efficiency measures that work for small and medium-sized businesses, homes and schools do not necessarily extend to these industries. You cannot simply install new lighting or insulation to improve efficiency when your facility uses as much electricity as a small city — as our very important smelting operations do. To risk losing them through higher prices — to force them overseas — does nothing to help our state's or nation's economy and does nothing to tackle the global challenge of climate change.

In anticipation of standards affecting existing power plants, we have undertaken a study to explore possible generation technology upgrades and integrating renewable energy into the state's electricity portfolio. The goal is to define potential compliance strategies (including boiler efficiency improvements and carbon capture and storage technologies) that would minimize the economic impact of compliance.

It's important to keep Kentucky's unique position in mind when discussing these and other options. It's not always easy to convey the complexities of these issues and how they affect our businesses and citizens, or how options that work in other states might not be appropriate here.

We are hopeful the federal government will give us flexibility, including a workable time frame, so that we can meet the objectives of reducing greenhouse gas emissions without harming our already-fragile economy.

Len Peters is secretary of the Kentucky Cabinet for Energy and Environment.

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