At its March 10 meeting, the Louisiana Public Service Commission didn't discuss an item that has been on the docket for more than a year. After the daylong session, the PSC ended without discussing a proposal for a renewable energy portfolio standard (RPS) for Louisiana — a program to get large utilities buying or generating renewable energy by a target date, thereby creating a market for in-state power producers. The vote was scheduled for May 19, but now, without a proper evaluation of the PSC staff's proposal, the future of a Louisiana RPS will have to wait.
It's a balancing act.
Both sides of the scale tip with each consideration: Will ratepayers get shafted? Will utilities stay out of the red? Are jobs stable? Is the environment benefiting? Are our local energy sources secure? And can the feds stay out of the state's hair?
On one side are Louisiana's electric utilities, the power plants they employ and other energy-specific special interest groups. On the other side are groups like the Alliance for Affordable Energy, the Sierra Club and other environmental and renewable-energy advocates. Holding the scales is the Louisiana Public Service Commission (PSC), the governing body for most of Louisiana's utilities. For several years, the PSC staff has tried to introduce the concept of RPS. After several rounds of rough drafts, comments, RPS task force meetings and third-party studies, the PSC now must tip the scales in favor of one side. So far, neither side likes the PSC's latest draft, which hopes to prod utilities to reserve 12.5 percent of their portfolios for renewable energies by 2025.
"That's too little, too late," says Jackie Theriot, chairman of the Louisiana 20 x '25 State Alliance, part of a national group pushing for utilities to invest at least 20 percent by 2025. "We've got to shoot for more than that. We have to move this more rapidly. If we don't adopt a program, the feds are going to come in and [adopt one] for us. I'm afraid that's what is going to happen, 'cause we've been at this too long."
Last year, the U.S. House of Representatives approved the Waxman-Markey Bill, also known as the American Clean Energy and Security Act, which would set a national "renewable electricity standard" of 8 percent by 2012 and 20 percent by 2025. In the last five years, 29 other states and the District of Columbia adopted their own RPS programs. Their goals show targets of up to 25 percent by 2020, or sooner — California is looking at 30 percent by 2020, and even Texas plans to make significant cuts by 2015.
In contrast to most other states, Louisiana's PSC proposes a "goals-based" RPS — a nonbinding, no-consequence agreement utilities would sign on good faith. The state "would not impose penalties if the targets could not be met," according to the PSC's proposal. Only six of the 29 states with RPS programs have adopted goals-based programs. Among the goals: create reliable, diverse, long-term and indigenous renewable resources; increase energy security; improve air quality; create jobs and avoid employment losses.
Entergy Louisiana-Gulf States, a main player in the RPS process, believes the PSC's low-balling tactic better reflects the realities in Louisiana.
"And if, in the next five years, it's proven things are moving better and faster than initially thought, then maybe the commission revisits," says Entergy vice president of regulatory affairs Mark Kleehammer. "The big picture, from the comments we made in the beginning, is that a federal Waxman-Markey, one-size-fits-all (RPS) would essentially mean that Louisiana is ... going to be shipping dollars to other states. The balancing act on the local level is you want dollars to stay here, you want resources to be developed, but you can only do that up to what's physically achievable within the state. The staff has done as good a job as you can do taking comments over and over from all these parties ... to come up with what is possibly their most realistic assessment of what is achievable in the state."
Others, like the Alliance for Affordable Energy, see an RPS with low goals as a missed opportunity.
"If Louisiana gets a real renewable portfolio standard, we can be leading the Deep South," says the Alliance's Christian Roselund. "We've been an energy state for a long time, but we'd like to see Louisiana remain an energy leader. The world is moving away from fossil fuels. [An RPS] is going to come one way or another."
The PSC first considered an RPS in 2005, but a study it commissioned to J. Kennedy and Associates Inc. concluded Louisiana didn't have enough renewable energies available, and current energy production wouldn't be able to meet significant requirements for a statewide RPS. Instead, the PSC developed a pilot program — a voluntary "green pricing tariff" program — which was picked up by Entergy and dubbed Geaux Green. Customers were able to purchase 100 kilowatt-hour blocks of renewable energy (mostly from a rice-hull generator and a generator fired by bagasse, a sugarcane byproduct) at $2.25 per kWh. The program debuted in 2008, but had limited success in attracting customers.
The PSC commissioned Kennedy again in 2009 to re-evaluate Louisiana's RPS potential and received comments from a number of parties. Commissioners concluded that an RPS could be done in 2010, but they suggested renaming it a "Renewable, Energy Efficiency and Alternative Energy Portfolio Standard" — a title that doesn't sit well with RPS proponents. Alternative energy advocates say the PSC turned its back on them and the entire RPS concept.
"We've been investigating this thing for over a year," Roselund says. "The whole time we're talking about a binding RPS, an RPS that matched the Waxman-Markey targets by 2020, and suddenly, we turn around and it's nonbinding and including all these questionable technologies. We were shocked. Obviously while we have been in conversation with PSC members and have been submitting comments like everyone else, we feel like they're listening to Entergy. And they're not paying attention to RPS best practices and policies from other states, and certainly not our comments. ... It's not an RPS at this point, and that's the most honest part of the document — they're not even pretending that it's a renewable portfolio standard."
The proposal includes clean, renewable energy technologies such as solar, wind and hydrokinetics — as well as controversial "alternative" energies such as nuclear power.
"We're tremendously disappointed the PSC staff chose to include dirty, dangerous and just plain nonrenewable power sources like nuclear," Roselund says. "That's frankly ridiculous."
Theriot, who also serves on the board of the American Sugarcane League, says nuclear energy "is not going to put anything in the paper for our rural farmers and ranchers." Though not entirely opposed to nuclear, Theriot wants utilities to invest in biomass, which would use farming waste (like sugarcane's bagasse) for energy.
Entergy operates two nuclear facilities in Louisiana — Waterford 3 in Kilona, and River Bend in St. Francisville. The plants have provided power since the 1980s. According to Entergy's fourth quarter 2009 report, nuclear power accounts for more than 30 percent of the company's energy portfolio — 1 percent less than its purchases of natural gas and cogeneration, and nearly 20 percent more than coal-fired generation. (Entergy's Geaux Green renewables account for only 3 percent of its portfolio.)
The RPS proposal does distinguish nuclear — somewhat — from other "clean" technologies. A footnote in the proposal says the RPS would restrict new nuclear development. Although nuclear facilities generate minimal greenhouse gases, which would help meet the RPS air-quality goal, Entergy feels singling out nuclear while including "clean coal" and other carbon-emitting technologies isn't fair to utilities.
"If they're going to have clean technologies," Kleehammer says, "they should consider nuclear in that same vein."
Entergy's nuclear program has been making headlines elsewhere. Last month, Entergy Corporation's Vermont Yankee plant was closed by that state in the wake of dangerous leaks and faulty information from Entergy executives. Kleehammer assures Louisiana residents that its local nuclear program has nothing to do with that disaster.
"We see the same newspaper articles other people are seeing with Vermont Yankee. That's very far removed from our part of the business," Kleehammer says. "Our record at Waterford 3 and River Bend, if you look at the economics of those plants today, they're very, very favorable to customers. ... They produce very low-cost electricity that's very stable."
The PSC also includes in its proposal a number of other nonrenewable "alternative energies," like advanced coal, landfill gas and municipal solid waste capturing, and combined heat and power (CHP), which produces electricity and heat from a single fuel source. In Louisiana, that would be natural gas. Though abundant hereabouts, natural gas prices tend to jump around. The PSC acknowledges that volatility, showing in its report that natural gas prices have risen as high as $14/MBTU (one million British thermal units) and fallen as low as $4/MBTU. The PSC suggests the discovery of natural gas in the Haynesville Shale might stabilize prices, but the Alliance says that's not set in stone.
"Natural gas is cheap now, but we don't know where it's going to be in the future," Roselund says. "There's a lot of natural gas, a tremendous amount, in the Haynesville Shale — it's also going to be more expensive to extract."
With the U.S. solar industry creating more than 20,000 jobs in 2009, renewable energy advocates see a mandatory RPS as having tremendous job-creating potential, especially with energy efficiency measures. The PSC notes that energy efficiency is one of the least expensive options to meet its goals, and it's labor intensive, not capital intensive like nuclear and other technologies.
Entergy says the PSC overestimates energy efficiency measures and new technologies, while groups like the Alliance say the PSC underestimates their potential. A separate PSC docket opened by Entergy to find out how capable Louisiana's energy efficiency measures would be prompted the PSC to stick with lower expectations, not the Alliance's recommendations. In the staff's RPS proposal, staff writes it "is unwilling to support the higher amounts of energy efficiency that the Alliance and the Sierra Club have recommended."
"It's a difficult balancing act," Kleehammer says. "The Louisiana Energy Users Group that represents large industrial facilities, they seem obviously very concerned with their members and the possibility of increased costs leading to job losses. So on one hand, you have job creation because people are installing and operating new facilities. But a manufacturer that's already on the ropes today because of global competition, if this is what pushes them over the edge to close their manufacturing plant, then the state loses jobs, too. There doesn't appear to be any real silver bullets or simple answers. It's a very complex mission the commission is trying to undertake."
The Alliance and Sierra Club want a mandatory RPS, which they say would allow utilities to invest in those job-creating technologies despite initial high costs. They argue the technologies would cost less over time as the market for them grows. The PSC, however, states in its proposal that it "does not believe that a mandatory RPS is in the public interest at this time," choosing instead a goals-based RPS.
A goals-based RPS would encourage utilities to implement renewables and energy efficiency measures, but if the goals weren't met, no penalties would follow. Utilities would have to submit annual "compliance" reports on their portfolios' progress. The PSC also suggests cost caps to prevent utilities from charging ratepayers with expensive technologies. Customers wouldn't see more than a 1 percent increase each year.
A mandatory RPS would impose financial disincentives on utilities that fail to comply. "Right now, if Entergy decides not to buy renewable energy under a goals-based RPS, it's sort of like, 'Well, so what?,'" Roselund says. "There's no consequence for Entergy for failing to do what they're supposed to do."
Entergy feels a goals-based RPS should include "modest financial incentives" for meeting RPS goals. But even with a mandatory RPS, Entergy says Louisiana doesn't have the resources to support many renewable technologies. Entergy participates in land-based wind farms in Texas and Iowa, but the company maintains that Louisiana (as well as Mississippi and Alabama) has no opportunity for land-based wind power. And though it's not opposed to offshore wind power in the Gulf of Mexico, Entergy says it won't move forward with construction because there isn't enough conclusive data and it's too expensive. Kleehammer says average customer rates could double.
"If somebody constructs this resource, and they put it 50 miles out into the Gulf of Mexico, and you have to add a lot of transmission costs on top of it to get the power to Morgan City or Venice ... it's a balancing act with consumers," he says. "If that costs 25 cents a kWh, it's going to raise everybody's bills. And that becomes more of a policy decision by the state and federal government: Does it makes sense to have those kinds of technology resource additions when we know it's going to raise people's bills?"
The Alliance sees it much differently.
"It's ironic they are questioning these technologies that are widely in use around the world and the country like offshore wind and at the same time proposing carbon capturing and storage, which, on the scale that they're proposing, is science fiction," Roselund says. "A lot of their technologies don't exist."
What the PSC does see as the lowest-cost options to achieve its RPS goals are CHP and biomass as well as energy efficiency measures. Farmers already are burning agricultural waste, but it's not being captured ("madness," Roselund calls it), and if it is, it's used only to power farming facilities.
"We've got the biomass, we can produce it, and we can convert it," Theriot says. It's up to utilities to make that investment.
The PSC, using the most recent data from 2007, determined that the renewable and alternative energies available in Louisiana now include agriculture byproducts (at 77 Gigawatt-hours), black liquor (a wood pulp byproduct, at 1,899 GWh), waste wood (a forestry byproduct, at 999 GWh), and hydroelectric power (at 1,000 GWh) — a total of 3,976 GWh. The state's energy portfolio by 2020, the PSC determined, could reach 16,000 GWh, nearly triple the state's current output.
Additional resources include rice hull, sugar cane, forest and mill residue generators, solar power, offshore wind generation and energy efficiency provisions. Together, they can provide the energy to meet the 2020 goal-based requirements, which mirror those of North Carolina (one of the goals-based states): 3 percent by 2012-2014, 6 percent by 2015-2016, 10 percent by 2018-2020, and 12.5 percent by 2021-2025.
"Louisiana is in a position to gain more from renewable energy than most other states," Theriot says. "We look forward to the (PSC) giving us and Louisiana what we've been waiting for, for a change."