Obama’s Race Against Time: The Climate Action Plan, and its impact on biofuels

A Need for A U.S. “Energiewende” that Works

As is articulated in The President’s Climate Action Plan, the United States faces the same range of challenges in mitigating adverse impacts of climate change as those being addressed by Germany’s Energiewende. But our energy profile is different and solutions have to be found that address these differences.

For example, we have an abundance of cheap coal and a fast expanding reserves of natural gas that give our power utilities a different set of options, when considering the use of renewables to generate power. Our grid covers a much larger area and is designed to serve power needs of multi-state regions.

Our utilities are both publicly and privately owned and all are regulated to assure continuance of service at fair prices. But the rates established by utility regulators are in part, market driven and power utility managements need some flexibility in helping them obtain adequate returns return on their “rate base”, if they are to continue to attract investors and finance their capital programs. Any “climate action plan” for the United States has to consider these realities, as the way utilities now operate is not likely to change any time soon, as the present system works.

That said, it is also clear and it is this author’s experience as a developer of bioenergy projects, that the increased reliance on renewable energy for power generation will not happen on its own any time soon under the existing model. In a recent experience with a power utility that operates a large coal fired power station in our area, we were able to propose supplying them with bio-coal from an on-site bio-coal facility that used USFS subsidized wood waste harvested from a nearby national forest. This low-priced bio-coal would be offered at prices comparable to thermal coal they now use. But we were told that the utility plans to phase out the coal fired power station and obtain power for our local grid from new natural gas fired power plants that are going into service. The utility management explained that they had considered using bio-coal, but the risks outweighed the rewards. It appears to be a good business decision that we could not rebut.

Next steps

We face the same impediments, as does Germany in increasing our use of wind and solar energy, and although some power authorities make it easier than others to accept feed-in power from these sources, the amounts available from place to place vary as do the need for bulk storage and connecting grid lines. It seems that if feed-in-tariffs are to be used to encourage use of solar and wind energy, they have to be negotiated with the affected utilities to reflect such differences and utilities should be allowed to opt out, if there is a high risk for adverse consequences that can be avoided by doing so.

With respect to the use of biofuels to produce power, such as those made from woody biomass, be it wood waste, wood pellets or torrefied wood, if a minimum amount that must be used is to be mandated by regulators, they must consider the characteristics and needs of each coal fired facility with respect to operating efficiencies, emissions abatement consequences and added capital requirements. Regulators may then be able to determine a floor price that would be guaranteed to the woody biomass supplier to keep them whole and a minimum price the user would have to pay on an energy equivalent basis, for the fossil fuels being replaced. Power user fees could then be modified to recover subsidies granted to woody biomass suppliers and added costs incurred by the power plants. Granted this regulatory approach will require more effort to implement, but it would be more equitable to all affected parties and would avoid undue consequences of price distortions that are in evidence in a program such as Germany’s Energiewende.

The author, Tim Sklar, can be reached at sklarincdc@aol.com.