Featured republicEn: Pat Wood

about 3 years ago

ClimateEye editor Chelsea Henderson had a chance to talk to former Federal Energy Regulatory Commission (FERC) Chairman Pat Wood, who since leaving public service has been working doggedly from his home state of Texas to develop energy infrastructure and facilitate the opening of energy markets to competition. Pat also chaired the Public Utility Commission of Texas under President George W. Bush's governorship.

How does having a competitive market benefit renewable energy sources?

It's simple: when you open up the market and get middlemen out of the way, people get to vote with their dollars. Take Texas as an example. Although it is best known for its role in oil and gas production, Texas has made great strides in the installation of wind and solar energy projects. Whether for corporate greening, price stability, portfolio diversity or because of the positive impacts on the bottom line, businesses want renewables, as do military bases, schools, and the general public for their homes. In the years since our retail electric monopoly franchises were broken open, we have become the largest renewable energy state in the nation. There is a strong link, which shows me people are way ahead of their governments and their utilities.

What did you do to make Texas the number one renewable state?

From the beginning in the late 1990s, Texas threw out a big welcome mat to renewables. We opened our markets to all buyers and all sellers. We removed old regulatory obstacles, streamlined permitting and interconnection, and devised a simple but effective Renewable Energy Credit trading system to implement the State's renewable goals. In a key move, we beefed up our transmission grid. The 2006-2013 CREZ expansion remains the largest single transmission construction project in U.S. history. CREZ was a legislatively mandated process we called the "Field of Dreams" grid —if you build it, they will come. A public collaborative process identified the best spots in Texas for renewable energy and expanded the grid accordingly, including to windy/sunny areas in the Texas Panhandle that are outside the grid's historic footprint.

What is motivating the shift to wind and solar in Texas?

Aside from the fact that the fuel (wind and sun) is free, the capital cost of wind and solar energy is coming down dramatically due to global market forces. There was a public push as well; in the 1999 restructuring legislation, we enacted a Renewable Portfolio Standard calling for 2,000 megawatts of renewables by 2009. In 2005, that figure got bumped up to 5,000 MW by 2015, with an aspirational goal of 10,000 MW by 2025. Today's renewable capacity exceeds 19,000 MW. We have continually shot past the goals, meaning the renewable trading credits had little cost. So, we achieved this incredible ramp up without state subsidies, which is good as subsidies distort the market. We are still dealing with the distortive impacts of the federal PTC, but I look forward to that phasing out.

You have great perspective on Texas. Can you tell me overall, what your outlook is for the energy paradigm in the U.S.?

This is sometimes hard to accept, but the reality is that coal is winding down its long reign as king of the U.S. power industry. But it's important to note that coal-fired power plants are not shutting down because they are dirty; many have been cleaned up to meet current EPA rules. Coal plants are shutting down because they are not cost effective compared to plants that generate power from natural gas and renewables.

I fear that the current top-down Clean Power Plan approach will not only distort wholesale power market efficiency, but be much more costly (not to mention more bureaucratic) than the customer-centered, bottoms-up approach we have taken in Texas. A lot of creative/regulatory/legal energy is being spent to set up a scheme to shut down coal plants that are already running their final laps under current regulations and market forces.

We also need to get the infrastructure back on track in the rest of the U.S. Focusing on the right infrastructure for the long haul is the way to go and will ultimately allow us to provide energy diversity and security. Some of that investment will be on the regulated side, and much more of it in the competitive market.

Connect your observations and thoughts on clean energy with the climate movement.

Obviously, most people are familiar with the issues about climate change. Many see clean energy adoption as an easy way to cut back on the amount of carbon dioxide we are releasing into our skies. But carbon dioxide is different from the traditional pollutants like soot, ozone, SOx and NOx. People don't usually think that something they naturally breathe out of their lungs is a problem, so it's a tougher sell. But there are other attributes of clean energy that are even more compelling for some: it is local, free, and provides balance to other power sources. So, I view the climate solution as a subset of the clean energy revolution, rather than vice versa.

When it comes to climate; it's worthwhile to do what we can now. But the things that are going to happen to the world in many places are already baked, and in those situations we need to focus our resources on helping people and countries adapt to a warmer climate.

It would seem that those who see wind and solar power as an urgently needed solution for climate change would want to see it put into the market as soon as possible. For that reason, I believe the Texas experience is instructive: the cheap (and fast) way to clean up the grid is to open up the wholesale AND retail power markets to competition. Look at the low wholesale and retail power prices in Texas. Compare our story to the increasing rates in the monopoly regions. You can achieve climate goals AND have less expensive power.

So we need to take the politics out of the debate and focus on solutions?

Politicizing the debate only benefits the status quo. There are lots of good reasons to clean up power plants and modernize the grid. If we like cleaner energy, we should articulate these multiple reasons. They will find the driver that resonates with them; sometimes it will be climate-related, sometimes it won't. Regardless, we can all work together to have a creative and positive outlook for our energy future.

We thank Pat for taking the time to talk about energy markets and share his vision. Do you know someone in the ecoright doing good work we should highlight? Contact us!