Almost one year ago, we started the Energy Leaders Forum, a collaboration between the New England Clean Energy Council and Mass High Tech, to spur conversations on current issues in the clean energy sector. Today, we are engaging in new dialogues by inviting some of the region’s thought leadership for breakfast and conversation. The following is a transcript of one of these meetings, and we will continue to publish the transcripts to share the discussions.
As per the original mission, this group is designed to bring together a range of collaborators in order to share perspectives and enhance awareness, communication, and collaboration. Of course, the opinions expressed here are those of the individuals in the conversation, and are not of the organizations these individuals represent, Mass High Tech, or the New England Clean Energy Council.
We’re looking forward to your feedback.
-Mitch Tyson
Energy Leaders Breakfast Club
1.1 Green Communities Act, Energy Costs, and Volatility
Peter Rothstein: Over the last, the last couple of months there’s been a narrative that’s been in development with a number of actors around the Commonwealth as the Green Communities Act has been going through oversight and review by the Legislature. And some of the arguments that have been pursued have talked about how energy costs are too high in the Commonwealth. They’re hurting the competitiveness of the regional economy and we can’t afford a lot of the incentives, a lot of the goals that are in the Green Communities Act to accelerate efficiency and renewables, that it’s costing the economy. I strongly believe that we need to be pushing back. And in fact a lot of this narrative that’s been out there has misunderstood a lot of the data about the economics of clean energy. It’s been claiming that in the Commonwealth we have the highest electricity cost which is no longer true. In fact energy costs have been coming down more rapidly than they have in other parts of the country. Part of that is natural gas. Part of it is efficiency. And a lot of the narrative that’s been out there ignores the impact of having these goals to incent innovation and investment and a lot of the returns that come over time as opposed to just from the first month of those investments.
Mitch Tyson: I think we in the clean energy world never saw developing our industry at the expense of the New England economy. We always saw it as a vital part of the economy. That a more efficient New England, a more renewable-based New England was going to be a stronger economy. Because we were going to keep the dollars here. We were going to be less vulnerable to the price increases and to the potential carbon regulations that will be coming as well as from other potential supply disruptions from around the world and that in the long run we’d have lower prices. Because renewable resources are fixed. Once you put them in place they don’t go up. This is a good opportunity is to go back and revisit and make sure we articulate the connection between a healthy clean energy economy and the economy in general in New England.
Rob Day: So one question the critics of these policies should ask themselves is how much did energy price volatility hurt them last time there was a natural gas price spike?
Jim Cabot: I was down in DC last week with the American Council for Renewable Energy and there was a presentation by Deutsche Bank on that exact topic. They walked through a significant quantitative analysis but essentially came away with the conclusion that businesses do better at a slightly higher average price that’s stable than an average lower price that’s volatile. It’s much harder to plan around and the business disruption costs you more in the long run.
Rob Day: That’s exactly right. The uncertainty is what’s a killer. And a lot of the manufacturers and business people in New England are pretty sharp about being able to plan as long as they know the parameters around which they’re able to plan. And when you’re looking at these imported energy costs – whether that’s fuel imported in or even at times electricity imported in – if we’re operating too close to the capacity margin that could have a pretty volatile impact on earnings. Energy costs are a significant part of the competitiveness of New England manufacturers and the like and we’d like to keep it that way by being able to give them an advantage in this region with a little bit more stability and ability to plan with the costs of the energy they’re going to be buying. So the idea here isn’t yeah, we’re trying to do green energy because it feels good to do it. It’s for very selfish reasons as business people. We want to be able to plan on stable costs. But we also want to make an investment with a payback in terms of being able to have cheaper input over time.
Marcie Black: So there are a lot of reasons to support renewables as everyone’s saying. There’s job creation. There’s energy security and more constant energy sources. But interestingly enough, solar is actually at cost parity right now depending on which LCOE model you use.* So as you said it’s a business decision that we should be investing in renewables. And it’s only going to go down.
*[LCOE = Levelized cost of electricity]
Jim Matheson: Yeah, that’s right, and I’ve got news for everybody – that’s only going to go down but fossil fuels are only going to go up. I mean coal is already starting to be subject to a pretty voracious appetite out of China. We’re already starting to export coal to China. Oil, I mean if there’s anybody who thinks oil is going to significantly going to go down in price on a long term basis you know, I’d like to have that separate debate with them. And natural gas prices are at historic lows. And yeah, I happen to think they’re going to stay pretty low for a while, but they’re not going much lower than they are.
Peter Rothstein: Yeah, we did some research into rates and bills as published by the Energy Information Administration at the Department of Energy. And that’s one of the most revealing pieces of data. There’s a common misconception that electricity costs too much in Massachusetts. And what’s actually happened is that bills have dropped from $109 in 2008 – average residential bills – to $97 in 2010. And back in 2008 there were 33 states that had lower household bills. Now there are only 20. So competitively, against other states, we’ve gotten to be much more competitive.
Rob Day: You know, we’re seeing now a whole lot of mainstream publicly traded Fortune 100 businesses who are increasingly planning around green power and energy efficiency markets as growth engines in the future. And one thing that is striking about this political movement right now is that the critics of these policies are speaking generally as one voice. And yet we know from being investors and others going out there and talking with these large corporates they’re planning on a future that is certainly includes these policies and certainly includes the energy mix we’re talking about. And so it’s just a little bit striking to me that we’re not seeing the capital equipment manufacturers. That we’re not seeing the insurance companies. That we’re not seeing the banks that are actually putting a lot of money and work investing in this kind of capacity. None of them are speaking up in support of energy policies in the state and elsewhere. And instead what we’re getting is this sort of rear guard action that really seems politically motivated. You know, that purports to speak for business, but as we know really doesn’t.
Bilal Zuberi: So it’s interesting. I feel like we’re sort of waiting for the DuPont moment like we saw in ozone depleting chemicals, right, where you know, there was this talk about the ozone hole and these chemicals were causing it and the industry fought against any kind of action to prevent that damage until DuPont stepped up. And DuPont said, “You know what? We’ve got commercially viable alternatives to the CFC’s and actually it’s in our best interest to sell more of those alternatives.”** So all of a sudden, “Yeah, let’s do something about the ozone hole.” And that’s really what unlocked the ability to have the Montreal protocol that had teeth attached to it. I feel like we’re waiting for that sort of inflection point in the large corporate community. But we’re seeing them all make massive investments in this future. We’re seeing them all you know, really look to drive P&L performance in the future built around these kinds of technologies.*** And yet we haven’t seen them really step up and start to articulate that yet.
**[CFC’s = Chloroflourocarbons] ***[P&L = profit and loss]
