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Critical Policy Issues for On-Site Generators

Critical Policy Issues for On-Site Generators. An End-User’s Viewpoint. Al Musur Chairman, Industrial Energy Consumers of America. Energy – This Country’s Biggest Policy Problem. Energy – This Country’s Biggest Policy Problem. Because energy is where economy, geology and ecology collide.

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Critical Policy Issues for On-Site Generators

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  1. Critical Policy Issues for On-Site Generators An End-User’s Viewpoint Al Musur Chairman, Industrial Energy Consumers of America

  2. Energy – This Country’s Biggest Policy Problem

  3. Energy – This Country’s Biggest Policy Problem Because energy is where economy, geology and ecology collide.

  4. Policy Areas • Natural Gas • Power Generation • Clear Skies • Electricity • Electrical Transmission

  5. Natural Gas Policy • Natural Gas is the Fuel of Choice

  6. Natural Gas Policy • Natural Gas is the Fuel of Choice • Exploration for Natural Gas is Bad

  7. Natural Gas Policy • Natural Gas is the Fuel of Choice • Exploration for Natural Gas is Bad • That Causes Price Increases • No CHP Projects with 5¢ electricity being displaced by $5 Natural Gas • 70% of Known Reserves on Unavailable Federal Lands • Prohibitions on • Lateral Drilling • Coal Bed Fractionation • 2800 Drilling Applications Back-logged at DOI

  8. Natural Gas Policy • Natural Gas is the Fuel of Choice • Exploration for Natural Gas is Bad • Lack of Oversight of Natural Gas Markets

  9. Natural Gas Policy • Natural Gas is the Fuel of Choice • Exploration for Natural Gas is Bad • Lack of Oversight of Natural Gas Markets • Commodity Futures Trading Commission (CFTC) • Lost Oversight of Natural Gas & Electricity Trading • No Standard for Determining Undue Market Influence

  10. Natural Gas Policy • Natural Gas is the Fuel of Choice • Exploration for Natural Gas is Bad • Lack of Oversight of Natural Gas Markets • Approval of Oil/Gas Mega-Mergers

  11. Natural Gas Policy • Natural Gas is the Fuel of Choice • Exploration for Natural Gas is Bad • Lack of Oversight of Natural Gas Markets • Approval of Oil/Gas Mega-Mergers • Eg. BP – Amoco • Loss of Investment Capital • Midsize Companies Purchasing Assets v. Exploring • Small Exploration Companies Quitting the Business

  12. Natural Gas Policy • Natural Gas is the Fuel of Choice • Exploration for Natural Gas is Bad • Lack of Oversight of Natural Gas Markets • Approval of Oil/Gas Mega-Mergers • Lack of Federal Regulatory Authority

  13. Natural Gas Policy • Natural Gas is the Fuel of Choice • Exploration for Natural Gas is Bad • Lack of Oversight of Natural Gas Markets • Approval of Oil/Gas Mega-Mergers • Lack of Federal Regulatory Authority • Reporting Injections

  14. Natural Gas Policy • Natural Gas is the Fuel of Choice • Exploration for Natural Gas is Bad • Lack of Oversight of Natural Gas Markets • Approval of Oil/Gas Mega-Mergers • Lack of Federal Regulatory Authority • Reporting Injections Full Storage = 3.2 TCFInadequate Storage = 2.8 TCFDelta 0.4 TCF < 2% of Annual Demand

  15. Natural Gas Policy • Natural Gas is the Fuel of Choice • Exploration for Natural Gas is Bad • Lack of Oversight of Natural Gas Markets • Approval of Oil/Gas Mega-Mergers • Lack of Federal Regulatory Authority • Reporting Injections • Reporting Transactions for Price Formation • Ordering Construction • Storage • Pipelines

  16. Power Generation • Crime to Burn Natural Gas in Non-CHP Power Generation

  17. Power Generation • Crime to Burn Natural Gas in Non-CHP Power Generation • Natural Gas is the only fuel available to most industry and is also a feedstock • Natural Gas is growing as the fuel of choice for residential use • For this there is no substitute • Utility generators can burn everything from garbage to nuclear fuel

  18. Power Generation • Crime to Burn Natural Gas in Non-CHP Power Generation • Burn Coal

  19. Power Generation • Crime to Burn Natural Gas in Non-CHP Power Generation • Burn Coal • Illinois alone has more coal that Saudi Arabia and Kuwait combined have oil • Developed technologies can burn coal cleanly

  20. Power Generation • Crime to Burn Natural Gas in Non-CHP Power Generation • Burn Coal • Burn Nuclear Fuels

  21. Power Generation • Crime to Burn Natural Gas in Non-CHP Power Generation • Burn Coal • Burn Nuclear Fuels • Spend Federal Funds on Developing and Commercializing Technologies rather than picking winners and losers in energy

  22. Power Generation • Crime to Burn Natural Gas in Non-CHP Power Generation • Burn Coal • Burn Nuclear Fuels • Spend Federal Funds on Developing and Commercializing Technologies rather than picking winners and losers in energy • No Renewable Portfolio Standard

  23. Clear Skies • New Source Review Reform

  24. Clear Skies • New Source Review Reform • Trade new CO2, NOx, Hg standards for NSR changes • Utilities trying to include CHP in Clear Skies NSR Reform • CHP projects should be exempt or there should be an output efficiency standard for inclusion

  25. Clear Skies • New Source Review Reform • Greenhouse Gas Issues

  26. Clear Skies • New Source Review Reform • Greenhouse Gas Issues • Energy Policy focused on GHG intensity • Clear Skies called for the DOE to revamp the 1605(b) Greenhouse Gas Registry to reward absolute reductions of Greenhouse Gasses • First step to the establishment of a Greenhouse Gas Emission Trading Program in the U.S.

  27. Clear Skies • New Source Review Reform • Greenhouse Gas Issues • Greenhouse Gas Emission Credits for CHP

  28. Clear Skies • New Source Review Reform • Greenhouse Gas Issues • Greenhouse Gas Emission Credits for CHP • Industrial installs a CHP facility for steam and electric generation • Gross Greenhouse Gas emissions for site go up • Net Greenhouse Gas emissions go down netting out the reduction at the utility stack for displaced generation • Utilities are claiming that the emission reduction at their stack is their reduction regardless how achieved • Utility view is generally accepted among White House staff

  29. Electricity • PURPA Repeal

  30. Electricity • PURPA Repeal • PUHCA Repeal

  31. Electricity • PURPA Repeal • PUHCA Repeal • FERC authority to enforce NERC operating rules

  32. Electricity • PURPA Repeal • PUHCA Repeal • FERC authority to enforce NERC operating rules • Net Metering Issues

  33. Electricity • PURPA Repeal • PUHCA Repeal • FERC authority to enforce NERC operating rules • Net Metering Issues • California ISO OATT • Illinois MISO may yield different result due to “regional differences”

  34. Electrical Transmission • FERC Authority

  35. Electrical Transmission • FERC Authority • Utilities have learned at the State level: if one doesn’t like what a commission decides, have the Legislature fix it. • Push on the part of Utilities to limit FERC’s authority: • Operating rules • RTO formation • Siting Authority • Utilities stirring up State Commissions & Governors to push States rights issues

  36. Electrical Transmission • FERC Authority • Regional Transmission Organization (RTO) / Standard Market Design Issues

  37. Electrical Transmission • FERC Authority • Regional Transmission Organization (RTO) / Standard Market Design Issues • Standardized CHP Interconnection Issues

  38. Electrical Transmission • FERC Authority • Regional Transmission Organization (RTO) / Standard Market Design Issues • Standardized CHP Interconnection Issues • Federal Authority for Transmission Design

  39. Electrical Transmission • FERC Authority • Regional Transmission Organization (RTO) / Standard Market Design Issues • Standardized CHP Interconnection Issues • Federal Authority for Transmission Design • No current authority to order transmission interconnection construction • No centralized siting authority • Suggestion – socialize the cost of upgrading the transmission system

  40. Electrical Transmission • FERC Authority • Regional Transmission Organization (RTO) / Standard Market Design Issues • Standardized CHP Interconnection Issues • Federal Authority for Transmission Design • Distributed Generation v Transmission Upgrade Issues

  41. Electrical Transmission • FERC Authority • Regional Transmission Organization (RTO) / Standard Market Design Issues • Standardized CHP Interconnection Issues • Federal Authority for Transmission Design • Distributed Generation v Transmission Upgrade Issues • USCHPA proposal for distributed generation instead of transmission upgrade

  42. Electrical Transmission • FERC Authority • Regional Transmission Organization (RTO) / Standard Market Design Issues • Standardized CHP Interconnection Issues • Federal Authority for Transmission Design • Distributed Generation v Transmission Upgrade Issues • August 14, 2003 Issues

  43. What Can I Do?

  44. What Can I Do? • Become conversant with all of the issues • Resist the urge to pursue only your narrow interests • Join with other consumer groups to achieve enough mass to be effective

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