Economic Outlook - March 2007

Study fuels a debate over renewable energy sources

Singer Willie Nelson peddles automobile fuel made from vegetable oil and animal fats. Raleigh-based Progress Energy, the state's second-largest electricity provider, experiments with poultry bedding and waste. Maybe the tide is turing against coal, petroleum and other nonrenewable energy sources. The state legislature is considering rules that force power companies to generate a percentage of their output from renewable sources. James Y. Kerr II, a member of the state Utilites Commission, oversaw a study of the issue by La Capra Associates, a Boston-based consultant.

BNC: What exactly is renewable energy?

Kerr: One of the issues much disagreed about it is how you ought to define it. Some folks would like to define nuclear generation as renewable. As a general proposition, a renewable source is solar, wind, hydropower, geothermal, ocean currents, wave-energy resources, agricultural waste, animal waste, wood waste, energy crops, landfill methane and hydrogen made from renewable sources. For example, we will continue to do livestock agribusiness, and folks will emit waste. Unless we quit raising cattle and pigs and whatnot, it is an infinitely renewing source of energy.

Who would oppose turning waste into fuel?

Some are concerned about the impact of hog operations, primarily hog-waste lagoons. This led in 1997 to the General Assembly's adoption of a moratorium on certain new or expanded hog operations. There might be some oppostion to measures that could result in lifting this moratorium.

Why did the state need its own study?

It's one of those policy areas that doesn't lend itself well to looking at what other states have done. States have different geography, different renewable resources, different costs for electricity. The more expensive your average cost of power is, the easier it is to justify doing things that might also be expensive. In our state, where power costs are below the national average, renewables are generally more expensive, so it's harder to cost-justify a renewable approach.

Would mandatory goals lead to higher electricity rates?

All the scenarios studied - except for one - forecast an increase in the electricity rate. The exception allowed energy-efficiency measures to count toward goals.

How else is North Carolina different from other states?

You're seeing a lot of wind power being generated in the Midwest. North Carolina has the potential for wind resources in the mountains and off the coast, and wind can be pretty effective. But we have ridge laws, and there are other countervailing environmental concerns about the mountains and how high structures can be built on the ridgeline.

Does the report affect the debate on the nuclear and coal-fired plants Progress and Duke Energy want to build?

Some parts of this report were introduced into evidence at a hearing we had on the Duke coal-fired plants. Demand in the state appears to be growing. Electricity is the principal energy source that fuels a lot of that growth in our economy. So the discussion becomes, 'How ought we meet this growing demand for generation capacity?' The timing of the report is good, given the issues we've got to discuss.

Could waste become a revenue stream for hog and poulty farmers?

It could. This does not necessarily mean it would be profitable, compared with current waste-handling and -disposal methods.

What goal does the study suggest?

About 4 to 5% of our generation in the state is from renewable sources already. If you require utilities to produce an additional 5% of their energy from renewables by 2017, that's a pretty comfortable goal. If you push it to an additional 10%, we probably don't have enough renewables that are cost-effective.

Will mandatory goals create jobs?

The report estimates a range from a net loss of nearly 5,500 job-years over 20 years to a net gain of over 54,000 job-years. A job-year equals one person employed for one year.

Does the issue pit power companies against environmentalists?

I don't thnk it can be broken down that simply. Both points of view were well represented on the commmitte that advised the consultants on this study. I don't know that they'll all agree with all of it, but I hope they've got confidence in it. Among others, Progress Energy, North Carolina Sustainable Energy Association, Environmental Defense, North Carolina Solar Center and Manufacturers and Chemical Council of North Carolina had representatives on the committee.

What happens to the study now?

It's a tool for the legislature as it draws a standard.

Will a law be passed this session?

I can't say whether it will pass, but a bill was introduced by Sen. Charles W. Albertson.

Is a patchwork of state renewable-energy laws really desirable?

There has been discussion of a national standard. I don't think that kind of policy should be made on a national level, because states have different priorities. How power companies meet their obligations is a matter of state law and policy. And it should be.

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