EEI 2015: 5 major utility CEOs on the transformation of the energy system
Chiefs of Edison International, AEP, Exelon and Southern hold revealing panel discussion
It’s not often that journalists get the chance to hear the leaders of four major utilities talk about the hot-button issues in the electric sector, but that’s exactly what the EEI annual convention provided Wednesday. The panel of the EEI board, moderated Dominion CEO Tom Farrell, featured outgoing EEI chair and Edison International CEO Ted Craver, Exelon CEO Chris Crane, Southern Company CEO Tom Fanning, and American Electric Power CEO Nick Atkins. They spoke on a variety of topics, from renewables subsidies to storage and the Clean Power Plan.
Renewables & Subsidies
Farrell started off the panel by asking about subsidies for renewable energy, a popular subject over the two days of conference conversations. Exelon’s Crane said that he thought the solar investment tax credit was a good example of functioning subsidy policy, while the wind production tax credit has driven overdevelopment, distorted power markets, and “skews” investment choices in favor of wind. Exelon is currently seeking taxpayer assistance for its Illinois nuclear plants, arguing they are essential for reliability, because low-cost, subsidized wind is undermining the economics of the plants. Those plants, due to their design, must run nearly continuously, even when there are lower-cost options on the market.
Fanning took a much harder line on the subject of subsidies, criticizing federal government efforts to “drive social change with the tax code,” while also expressing his opposition to a price on carbon, the Clean Power Plan, and a cap-and-trade system. Customers should define the resource mix, he said, not the government.
Edison's Craver was optimistic on the issue of whether increased penetration of renewables on the grid will cause problems for utilities. Only a few years ago, he and his engineers puzzled about how they would deal with 10% renewables on the grid, he said. But now, with California seemingly on the way to a 50% renewables mandate, Craver said the obstacles are more economic than technical. Utilities will find a way to integrate the renewables they have to deploy, he said, but the cost question remains.
But AEP’s Akins drew a regional distinction to that point. In his vast service area, especially in the Midwest, he told the audience that his commercial and industrial customers “drive a different solution” than what renewables offer alone. The cost issues for his utility, he said, stem from technical difficulties in integrating variable generation while ensuring that his C&I customers have quality, uninterrupted power.
Load growth & distributed generation
The day before at the convention, Tesla CEO Elon Musk predicted that the increasing electrification of the economy, led by growth in electric cars, would lead electricity demand to double or even triple, alleviating utility concerns of the “death spiral.” The utility CEOs, however, took some exception to that prediction. Akins said there are “mitigating factors” holding that load growth back, and Craver agreed. He said that he expects load growth to be flat or even decline, even as EVs proliferate. Advances in efficiency technologies and big data will have a huge impact on how much energy is consumed, he said, and those changes can be difficult to predict.
What Craver was more confident about, however, was Musk’s prediction that in the long run, a third of generation will be distributed, which could also hurt load growth for utilities. To that, Southern’s Fanning had a simple answer: “If distributed generation is eroding your growth, own distributed generation!”
And Farrell’s doing more than talk on that front. Last month, Georgia Power, a Southern subsidiary, announced it would enter the rooftop solar market. Distributed generation, Fanning said, is not disruptive. In fact, it’s a “natural evolution of central station generation.”
Asked by Greentech Media during the media availability how it responds to anticompetitive concerns from solar providers, Fanning said that his utility is simply responding to customer desires. Consumers want solar, and they want it from a trusted provider, so Georgia Power will enter the market. From his perspective, distributed generation is little different from central station generation, except for the benefit that it's closer to the customer, minimizing line losses.
Utilities know more about the grid than anyone, Akins said in backing up Fanning, so they should be the distributed generation providers if consumers want it. What’s more, he said, utilities can ensure that distributed generation can be deployed for all customers, while solar installers have tended to eschew low income communities with fewer means to pay for their product.
While Fanning dismissed the idea that distributed generation is disruptive, he did lend that label to energy storage. However, he said, lithium ion batteries probably aren’t the technology that will spur storage into wide adoption. The next generation of battery materials, whatever form they may take, should provide the storage breakthrough. Exelon’s Crane agreed with that assessment, saying lithium ion batteries will “struggle economically,” although he sees storage overall as a “game changer.”
Fanning did express some hope for utilities to make money off the storage boom, however. In talking about combining distributed generation and storage, he said “It’s not cheap, it’s not easy, and it’s not integrated. That can be our role.”
In one notable moment, Dominion’s Farrell stepped out of the moderator role to assert that “our industry should be aligning ourselves with people like Elon Musk,” especially on the issue of storage.
The Clean Power Plan
Farrell also said that he thinks the EPA’s proposed Clean Power Plan will likely largely survive court challenges, and asked the CEOs what they thought of the regulations. Not surprisingly, their responses mirrored the opinions of their service areas. Craver said that in California, there’s more appetite to make the mandates stronger than to weaken them (a comment that drew laughs from the audience and panelists, prompting Craver to say that it was “just a joke”). Exelon’s Crane also said his utility supports the Clean Power Plan, although they would like to see nuclear energy be given more credit under the plan for its zero carbon generating properties.
Akins, who runs the biggest coal generator in the country, said his utility would meet the targets, but stressed that the EPA must make changes to the final plan if the carbon cuts are to be workable. The worst thing that happened with the Clean Power Plan, Akins said, was that the EPA put forth an initial proposal so unworkable that utilities have had to wait for the final plan — due in August — to begin serious compliance work. Fanning concurred, calling the plan a “massive overreach” of the federal government and reiterating that consumers should be determining the fuel mix.
Given his opposition to subsidies, cap-and-trade, a price on carbon and the EPA regulations, Utility Dive asked the Southern CEO if he would support any federal efforts to decarbonize the energy grid. Absolutely, he said, but the targets need to be more manageable than the ones EPA outlined, and how to define the optimum resource mix should be left up to utilities and “the free market.” The rest of the panel largely agreed, declining to outline any policy alternatives to the Clean Power Plan, but reiterating that carbon targets must be “reasonable and rational,” in the words of AEP’s Akins.
But despite the rhetoric of the utility heads, all of them said they would work to meet the EPA’s carbon goals. AEP, Akins pointed out, has already retired more than 5500 MW of coal fired generation this year, with more retirements on the way. The key, the CEOs told Utility Dive, is to get a plan that’s workable, and that will mean that EPA has to give utilities more time to meet the carbon goals.
The new EEI Board
At the media availability, EEI also unveiled its new leadership board. Nick Akins was elected the new chairman of the trade group as Ted Craver left his post. Filling the open seat on the board was Pat Vincent-Collawn, CEO of Public Service New Mexico, the first woman ever to be named to the EEI board. She told the reporters she had high hopes for bipartisan energy legislation being crafted in Congress. Especially important her her utility, she said, would be a bill that eases siting and permitting of transmission, a process that, for large lines, can take over a decade. That, she said, would help utilities comply with the Clean Power Plan faster by facilitating the transport of renewable energy around the country.
Correction: A previous version of this article incorrectly stated Ted Craver's corporate position. He is the CEO of Edison International, the parent company of Southern California Edison, and not the CEO of the subsidary itself.
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