Wednesday, January 13, 2010

Comments on Delmarva Power's 2010 IRP

The Public Service Commission is holding hearings this week on Delmarva Power's Integrated Resource Plan or IRP. The PSC has closed Docket No. 07-20 and is opening a new docket. A great deal has happened since the old docket was opened, and it makes policy sense to start over, whatever the legal or technical reasons may be to open a new docket. But for now there is no draft IRP on the table; hence my comments are focused on what should be included in the new plan:

When debating the question of wind power in Delaware nearly three years ago, I told this Commission that we needed to rethink the connection between our environmental and economic interests:
The conventional wisdom is that the public’s environmental interest is in conflict with the public’s economic interest. But my review of the record leads me to conclude that the conventional wisdom has been turned on its head in this case; burning more fossil fuels doesn’t make economic or environmental sense for Delaware. Simply put, 19th century technology is not suited to meet the environmental and economic needs of the 21st century.
The docket before us is different, but the principle hasn’t changed. I argue that an economically rigorous Integrated Resource Plan (IRP) requires that we reorient our energy policy away from fossil fuels, and invest in renewable energy and energy efficiency.
The IRP must account for the full range of costs and benefits to customers from the generation and transmission of energy, which is why the PSC should adopt DNREC’s view that the IRP account for externalities such as health and environmental costs.
The traditional charge of the PSC is to protect the economic interests of ratepayer, but what’s a few cents per Kilowatt hour to those who suffer from the chronic health effects of pollution? These externalities may not show up in Delmarva Power’s financial statements, but can be all too real for its customers. According to the Delaware Division of Public Health, 1,731 Delawareans died of chronic obstructive pulmonary disease (COPD) in the five years from 2002 to 2006.
Accounting for the public and private costs of respiratory illness and other environmentally caused diseases should preclude the expansion of coal facilities in Delaware, and place further protections on air emissions and the accumulation of hazardous fly ash, which threatens both air and water quality.
If we properly account for health costs, we should also take an interest in out of state energy extraction and generation, including the importation of coal power from west of Delaware and the extraction of natural gas north of us. A DNREC study concludes that a significant portion of the PM 2.5 particulate matter in Sussex County air comes from the Ohio River Valley. If the prevailing winds blow particulate matter (and other contaminants) in from west, then we have an interest in reducing our dependence on coal burning plants from the region.
Natural gas, considered a cleaner source of energy than coal, still has potential hazards to Delaware. The Delaware River Basin Commission has voiced serious concerns about the extraction of natural gas from the Marcellus Shale formation on both sides of the Delaware River upstream from us.
However, these new extraction methods require large amounts of fresh water to fracture the formation to release the natural gas. A significant amount of water used in the extraction process is recovered, but this "frac water" includes natural gas and chemicals added to facilitate the extraction process, as well as brine and other contaminants released from the formation.
While regulation of out of state coal plants and natural gas extraction is outside the direct jurisdiction of this Commission, the IRP can and should determine Delaware’s dependence on these present and potential sources of pollution by placing greater focus on cost effective renewable energy closer to home and energy conservation.
The Bluewater Wind project will not exhaust the east coast’s large offshore wind resource. Even the recent announced sale of 55 megawatts (MW) of power to customers in Maryland leaves Bluewater well short of the 450 MW capacity already approved by PJM Interconnection.
Over the last three years, the PSC and the public have gained a clear understanding of the economic benefits of wind power in the form of price stability over the 25 year life of the power purchase agreement. No other source of energy can provide similar price protection over such a long period—except perhaps energy efficiency.
The IRP should reflect Delaware’s newly adopted statutory requirement for meeting energy needs through greater efficiency. The IRP was filed before the Sustainable Energy Utility opened for business and before the adoption of SB 106, which calls for a 15 percent reduction in electricity consumption and peak demand by 2015.
A study by the American Council for an Energy-Efficient Economy concludes that efficiency is a cost effective way to provide for our energy needs:
On the costs of "saving" kilowatt-hours (kWh) through utility ratepayer-funded energy efficiency programs, the reported utility costs of saved energy (CSE) ranged from $0.023 to $0.044 per kWh (with a median value of 3.0 cents/kWh).
If we are to reduce our dependence on out of state sources and make use of the full potential of renewable energy and energy efficiency resources, we will have to reorient the grid. Regulatory proceedings on the Potomac-Appalachian Transmission Highway (PATH) and the Mid Atlantic Power Pathway (MAPP) have been suspended due to reduced demand cited by Delmarva Power and PJM Interconnection.
It is time to revisit the architecture of the grid to support greater energy efficiency and better manage large- and small-scale renewable energy. The IRP should support Governor Jack Markell’s proposal to develop an offshore transmission backbone to accommodate the enormous untapped wind resource that lies off the east coast.
In conclusion, the IRP should reflect a full consideration of the economic costs and benefits of meeting our energy needs. The health costs of burning fossil fuels cannot be ignored. The economic benefits of renewable energy and energy efficiency are becoming increasingly clear. The PSC has a compelling interest in requiring that the IRP take all of these costs and benefits into account.


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