To Avoid Price Shocks, We Must Meet Energy Needs

Guest Blog | August 23, 2012 | Energy Efficiency, Energy Policy, Nuclear, Solar, Utilities
Susan K. Glickman

This guest post, 
written by SACE consultant Susan Glickman, originally appeared in the Sunshine State News, 22-Aug-12. Read the post and view the comments here.

The energy challenges of the 21st century demand new ways of doing things — namely, moving from the old paradigm of “selling energy” to one where we “meet energy needs” with less costly and less risky resource choices. This is how to diversify Florida’s energy mix.

Our current regulatory framework has led to 30-to-50 percent rate increases over the past decade, with Florida’s two largest investor-owned utilities back at the Florida Public Service Commission asking for more. We have made no meaningful inroads on incorporating energy efficiency and renewable energy as resources.

Instead, we have shifted all the financial risk from utility shareholders to consumers for the development of nuclear reactors that seem unlikely to be built given their ever-burgeoning price tag of upward of $25 billion. The end result is that Floridians export $50 billion per year out of state for fuel.

Clearly, these trends are not sustainable for a state that wishes to insulate its citizens from price shocks and promote economic development.

Current utility regulation puts the incentive on building new power plants since utilities earn a guaranteed rate of return for their shareholders on such assets. Conversely, there is no financial incentive for helping customers save money on their bills through energy efficiency programs since these programs defer the need for power plants – the very assets that maximize power-company shareholder value.

As one might expect, this perverse disincentive has led to paltry energy savings for customers. Not one of Florida’s investor-owned utilities broke the top-100 ranking of leading utilities nationally on energy efficiency savings – based on a list compiled for the Florida Public Service Commission. That’s a shame since energy efficiency is a utility’s lowest cost resource and can meet demand at a fraction of the cost of building new power plants.

Jim Rogers, the CEO of Duke Energy – which has just merged with Progress Energy — rightly extolled the virtues of energy efficiency in his recent appearance before the Florida Public Service Commission calling efficiency the “fifth fuel.” The recent merger provides a unique opportunity for Duke Energy to bring its successful track record in the Carolinas to Florida.

Southeastern Utilities Energy Efficiency Program Impacts, 2011

Another fact is that the capital costs of building conventional and nuclear power plants are spiking upward while costs for renewable energy technologies, such as solar PV, are dropping rapidly. The projected capital cost of nuclear reactors has tripled in the last 10 years due, in part, to higher commodity prices for steel, copper and concrete on world markets.

In contrast, the cost of solar PV has dropped from $27 per peak watt in 1982 to about $2 today. Dr. James Fenton of the Florida Solar Energy Center presented at The Florida Energy Summit that electric cars fueled by solar electric panels manufactured in Florida can “fuel” cars for the equivalent of $1.08 a gallon and he predicts that solar will be at $1 a watt by 2015 with grid parity by 2013.

And while solar power does not provide around-the-clock power, its generation profile and competitive price make it a prime emission-free resource for meeting summer peak demand in most parts of Florida. Likewise, biomass resources – while providing a new market for Florida farmers — meet baseload needs at all times of the day. In addition, there are significant economic development opportunities with efficiency and renewable energy creating more jobs than traditional fuels.

Yet, these valuable resources provide less than 2 percent of the state’s electricity generation. The state must ensure that renewable resources comprise a bigger piece of the energy mix. That’s the diversity we need.

To get there, Florida must have an open and transparent integrated resource planning (IRP) process that places energy efficiency and renewable energy on a level playing field with conventional resources. Now we have three disjointed components: the 10-Year Site Plan filing requirement; the Florida Energy Efficiency and Conservation Act (FEECA) process; and the determination of need for new power plants.

An IRP process that permits stakeholder involvement will help ensure that the state’s power companies choose the lowest cost and lowest risk energy mix for Florida customers – the side benefits keep energy dollars here at home and creating jobs.

Susan Glickman represents the Southern Alliance for Clean Energy in the Florida Legislature and directs the Florida Clean Technology Business Council. She is a Florida native and a graduate of the University of Texas at Austin.

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