Taking Control Of Our Energy Future
Maryland Association of Counties Keynote Address
August 16, 2008
Our Vision: “To Find It Or Build It”
So what do we do about all this? Well, as we seek to address these challenges and take control of our energy future, there are two hard realities that I think we need to acknowledge in order to be able to move forward. In fact, we need to accept them if we’re going to be able to forge the consensus necessary to move forward.
First, deregulation alone, that is, free market competition under the current FERC rules, has failed us. And there is no evidence that markets alone will respond quickly enough to avert the greater crisis on the horizon of brown-outs and black-outs. Nor will free market competition by itself avert the economic and social displacement that will come about with the sky-rocketing financial and environmental cost of fossil fuels -- which brings me to the second really difficult reality that we need to acknowledge.
Our energy future is closely and inextricably linked to rapidly rising global market demand.
What do I mean by that? In the 21st century’s global economy, we are increasingly finding ourselves competing with rising economies like China and India for global commodities, the things that power the turbines that make the electricity generate. And the hard reality is that those commodities -- oil, natural gas and coal – there’s an increase and will continue to be an increasing demand for those things.
The hard reality is that 60 percent of our electricity in Maryland is generated by the burning of coal. In China alone, get this, they are on pace to build one new coal-fired plant each week. Each week! There’s a reason why exports are up at the Port of Baltimore.
You know, a lot of that is commodities from West Virginia that are leaving our port. The price of coal -- whether it’s shoveled into a Maryland power plant or leaving the port of Baltimore in a ship bound for Asia -- has risen by over 50 percent compared to this same time last year. Just as global market forces brought oil up to $140 per barrel and gasoline to $4 per gallon, worldwide demand for coal is driving up all of our electric bills, at home and, of course, all over the world as well.
And against these new realities come our shared imperatives. In the short term, our mission must be to combat unfairly tilted markets and profiteering on energy prices, while committing ourselves to greater conservation in order to avoid the economic and social disruption of rolling brown-outs and black-outs.
And in the long-term, our mission is to accelerate a better mix of new power generation, technology, and renewable resources to take us through the next several decades.
To make progress in the face of this rising challenge, let me suggest at least six ways that we might move forward together, and this list is by no means exclusive:
Number one. We want to partner with you at the metropolitan, at the county, and at the municipal level to develop smaller scale “peaking plants” that can actually feed into the grid for those 20, 25, 30 days out of the year when the demand for electricity is at its highest, which contributes to the overall price that has to get baked into all of our rates throughout the year. We want to work with you and partner with you to develop smaller scale peaking plants.
We’ll propose new legislation next session to make financial and technical resources available through the bonding authority of the Maryland Environmental Services Agency in order to bring new plants online as soon as possible.
Any new generation in our State defends all consumers, really, against the threat of power disruption. And I know that none of us are really expecting any municipality or county to take on the construction of Calvert Cliffs III on their own, but smaller scale, on-site generation and behind-the-meter generators can be cost-effective and considerably less complicated to build
We’re already partnering with Frederick County Commissioners on potential partnership involving the town of Thurmont. We also have a long-established model in the town of Easton of how smaller, municipally-owned generation can actually save significant energy costs for municipal consumers while meeting the overall demand for generation on the grid.
I also firmly believe that organizations like the Baltimore Metropolitan Council, which already figured out ways to pool contracts, can be a tremendous tool for us in coordinating the potential for new generating capacity, over which the public has greater control.
Number two. We believe that we can make our State the national leader in renewable energy.
And we plan to move forward toward making our State one of the very first in the nation to use its market power to jumpstart large-scale, commercial renewable energy projects.
Earlier this week, we formally offered to purchase hundreds of megawatts of our State government’s electricity from renewable energy sources. And by offering long-term contracts for clean, renewable power, we can accelerate the arrival of more commercial-scale projects like Delaware’s off-shore wind farm or proposals for an Eastern Shore power plant that’s powered by poultry litter.
We’ve also been able to reach an agreement on an innovative partnership with Ike Leggett and Montgomery County, the University of Maryland and the City of Baltimore to pool our combined purchasing power to attract new commercial development of renewable energy to our State. We will also be willing to agree to other energy purchases in exchange for the development of a renewable plant or plants.
We must also find ways to help our families and businesses install more green energy systems in their homes. The demand for this is so great, and so popular was our program that encouraged families to install geothermal systems or solar, that we totally wiped out the funding in the first month. We have to find other ways that we can help to move this along.
Number three. We must continue to find ways to accelerate the development of so-called Smart Meters and Smart Pricing to consumers in order to reduce consumption and, therefore, reduce the rate of demand growth. Throughout the day energy prices actually fluctuate based on electricity usage. And with Smart Pricing, consumers are charged less for electricity during non-peak times. Smart Meters also give us all the power to lower our electric bills by choosing to run the dishwasher or the clothes dryer during off-peak hours.
We know from pilot programs that have been done in other States and here, that consumers can save about 15 percent and help us achieve our conservation goals which also leads to a lower bill.
Number four. Some of our valued federal agencies in Maryland already maintain on-site generation that can also come to the aid of our entire State by working as peaking units. More should be encouraged to do so in partnership with State and local governments.
And we know that we have solid partners in our congressional delegation who took the time to be with all of us today, once from county government, always from county government -- but in the halls in Washington and places like NSA and the other federal installations in our State, could be a tremendous partner with State and local governments in taking control of our energy future.
We’ll pursue more partnerships with federal facilities and other large institutions to move from the notion of back-up emergency generators to a new notion of a fleet that is increasingly controlled by the public’s interest and that can relieve the stress on our grid.
Number five. We will provide assistance to our lower income neighbors who are struggling to afford energy prices during these difficult economic times. We have designated, as you know, millions of dollars from our Strategic Energy Investment Fund to help increase our current investments in energy assistance for lower income families. Conservation and conservation technologies, I believe, need to become a much bigger component of that assistance. None of our neighbors should have to face a winter without heat or a sweltering summer’s day without some relief.
And number six. This week, the Public Service Commission issued an order which represents the first step toward directing utilities to either find or build new generation to address any future supply shortfalls that the market is not reasonably expected to deliver in time for us to keep the lights on in 2011, 2012, and the years that follow.
We cannot stand idly by and wait for market forces or the electricity good fairy to come in and solve this problem for us. All of the experts are telling us that demand is outpacing supply and we know that there’s no new generation coming online now. We have to do something about this now or the rolling brown-outs and black-outs will happen. We already saw what happened when we tried to whistle a happy song by a 70 percent rate hike. If we don’t act, these brown-outs and black-outs are going to happen.
Why Not Just Re-Regulate?
So given the bitter experience of the prior four years, I know that there are many of you who have asked -- and you’ve heard this question asked of you by your neighbors -- why can’t we just simply pass a law and re-regulate? Why can’t we simply pass a law and go back to re-regulation?
In fact, there have been proposals in both houses of the State legislature which purported to do just that. The problem is that no one is willing to raise the $20 billion in new revenues, in new taxes, that would be required -- if it were even Constitutional -- so that we can buy back the power plants from the holding companies and put them into a regulated market. Nor is there any political stomach for raising $10 billion in new taxes to put the State squarely in the business of power generation.
Now I know how much all of us wish -- I know I do -- that there were a simple, cost-free solution to this complex problem, but our shared reality is not simple and it is not cost-free. In fact, as the Senate came to realize in short order in the last session, passing a law that requires that all new generation in our State be owned by a regulated utility actually has the unintended practical market consequence of foreclosing any new generation in Maryland -- a result that would most certainly lead to even greater price spikes than the ones that we’ve already suffered as demand grows without new supply.
With that said, if we’re willing to reach a consensus that re-regulation can mean something other than taking back power plants, there are solid potential options and we’ve asked the Public Service Commission to investigate and offer a report on several of them.
Some of those possibilities might be requiring all future generation to be owned by in-state utilities. But before we would make such a move let’s be very clear in understanding that the cost of constructing new regulated generation will be passed onto all consumers in their bills, just as surely as the cost of the fuel used to generate those turbines.
Another option might be developing new plants that are financed by utilities, although not owned by them outright. But again, let’s make sure that we understand the degree by which rate-payer’s bills will go up in order to indirectly finance new regulated generation.
We might also consider public-private partnerships in which the State itself takes a long-term ownership interest in a large commercial scale project, with a significant up-front investment.
Conclusion: The Politics of Posterity
Before I leave you today, I want to make an important admission and it is this... as much as I’ve thought about this problem and as much as I’ve been able to sit down with very smart, professional people who study this problem day in and day out, and as much as I’ve read about this problem and its imagined solutions, I really don’t know how this one turns out. I wish I could tell you that I do.
The complexity of our current challenge demands that we pursue a number of different paths which, we hope and we pray, will converge on that horizon of possibilities with other paths being pursued in science, in technology, in chemistry, and in physics -- here and around the world. You see, we act, we create, we innovate, we lead -- not because others will not, but rather, because of our faith that others must and will.
Take heart in the important progress we’ve made in just 17 months towards a more secure, stable and sustainable and renewable energy future:
Working together, we led the charge to hold the first auction of greenhouse gas emission credits in the nation through the Regional Greenhouse Gas Initiative. And when we participate in the first-in-the-nation auction next month, we will be able to use those revenues to advance that common good of controlling our energy future.
Working together, we set up some of the most ambitious goals in our nation for lowering consumption by 15 percent in 2015. A goal that now Senator Obama is advancing on the national level, we did that here in Maryland first.
Working together, we created the Climate Change Commission, we signed the Clean Cars Act, we created tax incentives to help families bring greener energy systems into their homes.
Working together, we created new green building standards for our schools and invested in green technology for all our schools. We have begun the conversion of our vehicle and mass transit fleets to renewable, cleaner fuels.
And working together, we passed legislation that will move our energy portfolio towards 20 percent renewables in little over a decade.
We know that taking control of our future is not going to be easy. There are tremendous profits being made by a small number of countries and a small number of corporations for every last day they can wring out of this new status quo of rising energy costs and rising global demand for fossil fuels.
But this new status quo, my friends, is not sustainable -- not sustainable for working families, not for the cause of growing the ranks of our middle class, not for the cause of our State or our country’s security, not for the cause of expanding opportunities of health and longevity to more people -- people like our children and our children’s children.
In the face of this challenge, I need your help. I need you to help us as a people reject the politics of greed and the politics of ease. To reject the politics of stupid simplicity and the politics of self-destruction by self-consumption.
In Maryland, it has been our history to refuse to “be the slaves of circumstance, but rather to make our own event.” In Maryland, we choose to practice the politics of posterity. The politics which embrace the duty we have, not only to our neighbors, but to the next generation.
The politics of posterity. The politics which have guided us together to nearly close the $1.7 billion structural deficit, to make record investments in education, to expand healthcare to 100,000 of our neighbors, to close the backlog of 24,000 unanalyzed DNA cases so that we can become not only one of the wealthier States in the nation, but also the safest.
As we look toward that stronger future that we all prefer, our tomorrows will indeed be better than our today, but only if we work to make it so. And only if we work together.