Secretary Perry’s Hearing (Part II)

“We have an politicized “all the above” electricity policy to the detriment of natural gas direct use. If energy diversity for electrical generation is desirable, then alternatives to electricity be also be desirable. This is especially true when considering diversity of energy delivery mechanisms (pipelines and wires) and the fact that customer outages are predominantly due to downed wires, not generation outages.”

Last month, US Department of Energy Secretary Rick Perry held a hearing before the House Energy & Commerce Committee. None examined the very important issue of over-electrification.where public policies discriminate against direct-use natural gas.

The concept of an “all-the-above energy policy” was a recurring theme of Secretary Perry’s hearing with the House Energy & Commerce Committee on Thursday October 12 [1] This is a popular fiction; like another of Secretary Perry’s reoccurring themes that energy is not a free market. While I generally agree with the latter theme, it’s not because energy is highly regulated. It’s because it’s highly politicized.

We have an politicized “all the above” electricity policy to the detriment of natural gas direct use. If energy diversity for electrical generation is desirable, then alternatives to electricity be also be desirable. This is especially true when considering diversity of energy delivery mechanisms (pipelines and wires) and the fact that customer outages are predominantly due to downed wires, not generation outages.

The highlight of this hearing (in my opinion) was Secretary Perry’s comment that the Obama Administration placed its thumb on the scale to support renewables and other clean energy options. And it was an understatement.

However, it’s difficult to reconcile Perry’s statement with the current mission statement of DOE’s Office of Energy Efficiency and Renewable Energy (EERE): To “create and sustain American leadership in the transition to a global clean energy economy.” In practice, “clean energy” is highly biased against natural gas direct use, even though natural gas is the predominant agent for pollutant and GHG emission reductions, according to both DOE and EPA. Apparently, however, using natural gas to fuel electric power plants is considered to be “clean” but using natural gas directly somehow isn’t.

Regardless, the debate has since moved over to FERC via Docket No. RM18-1-000, titled Grid Reliability and Resilience Pricing. The Comment due date is October 23, 2017. While current attention is focused on the Docket and its potential impact upon competitive markets for wholesale/intrastate electricity, it’s important to recall the strategic direction FERC operates under. Per FERC’s current Strategic Plan: [2]

  • The Office of Enforcement (OE) protects customers by conducting oversight of energy markets, identifying and remedying market problems in a timely manner, assuring compliance with rules and regulations, and detecting and combating market manipulation.
  • The Office of Energy Policy and Innovation (OEPI) advises the Commission on policies to ensure the efficient development and use of transmission, generation, and demand-side resources; remove barriers to the participation of emerging technologies and resources; and create a platform for innovation in wholesale energy markets. (emphasis added)

Rational consumer objectives for the current docket should include:

  1. To ensure a level playing field is established for all sensible “demand-side resources;” including the direct use of natural gas.
  2. To ensure that FERC’s demand-side resources policies—and all policies for that matter—are consumer focused, just and reasonable for utilities, and agnostic in regards to technology or industry sector. Direct use of natural gas should not be excluded as an allowed electric demand side management strategy.
  3. To encourage FERC to clearly define its frequent use of the term “sustainability” so it can be properly implemented and evaluated, or discarded if it is contrary to consumer interests.

Achieving such objectives will be difficult, time consuming, and an uphill battle given that the same “clean energy” battle within DOE and EERE is become entrenched (to some extent) within FERC. Enabling “broader” consumer choice, if that choice is to be limited to electricity, grossly and unjustly restricts meaningful consumer choice.

If policies encourage more electrification to the detriment of other, more cost-effective (and potentially cleaner) energy choices, FERC will err in its charter to protect consumers, and reliability will likely suffer. The following bullet points summarize these concerns:

  • Per the National Association of Regulatory Utility Commissioners (NARUC) “General Principle” for restructuring the electric industry:[3] “Consumers should have access to adequate, safe, reliable and efficient energy services at fair and reasonable prices at the lowest long-term cost to society. Structural changes in the [electric] industry should be encouraged when they result in improved economic efficiency and serve the broader public interests.”
  • In the words of one ex-FERC energy policy veteran:[4] “Conservation incentives can be distorted to provide promotional funding for improved efficiency electric appliances that are still inferior to certain gas appliance options, which are not receiving supportMany electric utilities are now comfortable and familiar enough with these policies to try manipulating them.” (emphasis added)
  • Per Donald Santa (during his tenure as a FERC Commissioner):[5]The line has to be drawn when the utility’s plan for what it calls ‘competition’ perpetuates the monopoly powers that can be used to thwart true competition.

The above citations stand the test of time and are still relevant although the situational details have changed. Free market advocates should feel compelled to voice concerns about the growing chorus intent upon weaning American consumers away from the direct consumption of fuels and towards an electric-energy monoculture. This chorus includes those of the Natural Resources Defense Council (NRDC) “Sustainable FERC” program. Such theories are based on disproven assumptions that renewable energy is poised to do it all affordably and cleaner without negatively impacting reliability.

The most recent “study” intended to drive energy consumption away from natural-gas direct use and on to electricity also comes from the NRDC per the following:

America’s Clean Energy Frontier: The Pathway to a Safer Climate Future. The following excerpt summarizes the intent:

2.3 ELECTRIFICATION: PUTTING CLEAN ENERGY TO WORK

The NRDC Core Scenario capitalizes on the rapid decarbonation of the electricity grid by converting many end uses that currently rely on fossil fuels (e.g., vehicles, space heaters, water heaters) to electricity.

Free market advocates should reject such concepts as worse than irrational and consider that such proselytizing, if made official policy (as NRDC et. al. hope) could set up another “too big to fail” scenario and the “great recession” it engendered. Except this time, people could die as a result. At a minimum, the growing number of less fortunate Americans will increasingly and substantially suffer as a direct consequence of over-electrification in the false pursuit of “deep decarbonization.” In case this sounds overly ominous, this scenario was, in fact, the basis of the Obama Administration’s “United States Mid-Century Strategy for Deep Decarbonization” published in November 2016. The following is an excerpt:

With a clean electricity system comes opportunities to reduce fossil fuel usage in these sectors: for example, electric vehicles displace petroleum use and electric heat pumps avoid the use of natural gas and oil for space and water heating in buildings.

Another reoccurring theme in Secretary Perry’s hearing and the Federal Register docket for this proceeding is energy reliability and resiliency. As discussed in Part I, electricity isn’t the only form or even the best form of energy in terms of resiliency and reliability; at least not during hurricanes or polar vortices.

Conclusions

The best way to attain an elusive “level playing field” is to eliminate all subsidies rather than add additional subsidies in the hopes that they will somehow balance out. They won’t. If the electric grid is overly stressed from excessive end-use electrification, then the following advice should be applied: “If you find yourself in a deep hole, quit digging.” Or, as Tom Tanton put it: “If you’re overly stressed, eliminate the stressors.

Having viable alternatives to electricity will help keep these forces in check. So, in closing: Ignore alternatives to electricity at your own peril. Over-electrification, in terms of consumer economics, is the equivalent of assault and battery. This violates the stated basis of President Trump’s America First Energy Plan to “lower costs for hardworking Americans.”


[1] http://ift.tt/2z7a2Fo

[2] http://ift.tt/2ALAPsO

[3] NARUC press release No. 35-96, July 29, 1996

[4] William Hederman, Jr., (when managing director of R.J. Rudden Associates) quoted in Gas Daily, November 16, 1992

[5] Quoted from Electricity Daily. Volume 5, No. 99, page 2. Monday, November 20, 1995


Appendix: Assessment of Non-Grid Energy Reliability During Recent Hurricanes.

CHP/DG/Microgrids:

Vehicle Fuels:

Miscellaneous:

Excerpts from Florida Public Utilities Co. report on AGA Updates on Hurricane Harvey (posted 09/13/2017)

All gas leaks and storm-related natural gas system repairs have been completed. The limited number of natural gas repairs is attributed to the significant pipeline replacement efforts completed under Florida’s Gas Reliability Infrastructure Program (GRIP).

The Eight Flags Energy Combined Heat and Power Plant on Amelia Island is fully operational and currently generating 20 MWs of power. Eight Flags runs on natural gas and produces steam that is purchased by a local pulp and paper mill. The power that it generates is bought for distribution to Florida Public Utilities’ retail electric customers.

Florida Public Utilities Co. says, in a letter to their customers, that natural gas deliveries were not interrupted during the hurricane.

They have completed a significant amount of work on gate stations and Metering and Regulation (M&R) stations as well as large volume customer meter stations. This work was critical in helping them maintain service during and after a storm of this nature.

Harvey and Irma Assessment Posted on September 13, 2017

SNL Energy’s Sarah Smith reported on Tuesday afternoon that, “The gas utilities of the Southeast appear to have come through Hurricane Irma with minimal infrastructure damage despite the devastation wrought over large swaths of the region.” Smith recounts positive news from Florida Public Utilities Co., Florida City Gas and South Carolina Electric & Gas Co.

E&E’s David Iaconangelo analyzes the impact of Hurricanes Harvey and Irma on the oil and gas industry. He spoke with Richard Kuprewicz, president of Accufacts Inc., who said in the lead-up to Irma’s landfall that pipelines were often designed “so they can run independently, like an island on their own.”

Operators of the Gulfstream and Sabal Trail pipelines, which deliver natural gas from neighboring states to central Florida, said Irma had not interrupted service.

Excerpts from CenterPoint Energy assessing damage, restoring power following Hurricane Harvey (posted 08/26/2017)

Natural gas system in Houston is functioning normally.

Excerpts from Harvey cleanup efforts for gas utilities may be cheaper than post-Sandy repairs (posted 09/31/2017)

CenterPoint’s gas system has continued operating normally despite the storm and flooding, according to company updates.

Texas Gas Service Co., too, has service territory in southeastern Texas and also has been able to maintain normal service on its system.

Excerpts from How Waffle House’s hurricane response team prepares for disaster (posted 08/25/2017)

“If we have gas for the grills, we can open,” said Warner. “We tailor the menu for what we can cook. Obviously, without electricity we’re not gonna have waffles, but we can bring in water and porta potties. If we don’t have electricity we can bring in generators. We’ve had some cases that before the generator came, we were there with candle light.”

 

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November 15, 2017 at 01:28AM

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