Brief:

To bring cheap low carbon power onto the grid quickly and stimulate the economies of industrial and agricultural states in the South and Midwest, the federal government should create a Clean Power Authority. The CPA would purchase electricity from industry, agriculture, and municipal waste facilities at a price cheaper than that transmitted by new coal-fired generators. The carbon-heavy, struggling industrial economies of the South and Midwest have an untapped reservoir of energy that could equal the output of as many as 69 nuclear plants, but is now wasted. Just as the Tennessee Valley Authority was created to provide affordable, clean power while fostering regional economic development and preserving the environment, the CPA would foster the production of cheap, low-carbon power in the Southern and Midwestern states, stabilizing the grid, creating thousands of jobs, drawing investment to the region, making the heartland a national leader in clean power.

What the Initiative Would Do:

The CPA would be a self-funding public agency with a mandate to buy zero-or-low-additional carbon power generated from industrial, agricultural, and municipal waste in the 19 states of the South and the Midwest. The CPA would purchase the power at a price no higher than 80 percent of cost of new, delivered, coal fired generation and resell it to federal and state power users, local industry, or swap it out on the grid. The CPA’s mandate would be to bring this power onto the grid rapidly; thus It would arrange for the speedy permitting of new equipment through the EPA and local agencies, arrange for consistent connection standards and equipment across all states (for economies of scale) and through local utilities and state PUC’s. The CPA would catalyze local universities to create engineering and technical programs focused on more efficient, distributed, generation. The CPA could, if funded by Congress, provide low-cost loan guarantees, much as the federal government now provides such services for nuclear power plants.

Electricity’s Triple Challenge:

The CPA is the best way to solve the three looming electrical grid problems that the US must confront over the next 20 years: supply, reliability, and carbon emissions. As the population and economy grow, the US needs to increase its electrical supply by nearly 30 percent over the next 20 years. While the cost and long time frame required for building nuclear power plants is well known, even the costs of relatively cheap coal generators have increased by 77 percent since 2000. A separate crisis of reliability, caused by decades of underinvestment in capacity, transmission, and control, is already causing blackouts and disruptions that cost the economy $180 billion a year. Finally, electrical generation accounts for 41 percent of US CO2 emissions--more than any other source--which must be reduced to conform with local and international laws.

Debate over how best to address these issues has been partisan and unproductive. Republicans have advocated building more power supply (coal, gas, or nuclear) while Democrats push aggressively building low carbon generation such as wind, solar, and (sometimes) nuclear. Both approaches are expensive, require long lead times (decades in the case of nuclear power) to build, and fail to address the problem of electrical reliability.

Though wind and solar power can provide low carbon power, they will not solve the three problems in a timely or economical way. Wind and solar require decades, and are more expensive than fossil fuel generation, and will require massive investments in transmission lines, and backup generation for when there is no wind or sun. Despite heavy investment that has lead wind and solar generation to grow by 20 percent a year for the last four years, these alternative power sources still make up less than 2 percent of the US electricity mix.

Recycling Waste Energy Is A Cheap, Quick Solution

As an immediate strategy, the US would be much better served by investing in “recycling” wasted energy to quickly make the grid greener and more reliable. At the moment, the US electrical system is strikingly inefficient: approximately 70 percent of the energy used to create power is lost either during the generation process or by power lines during transmission. Installing equipment to capture lost heat, pressure, gases, and other wastes in factories, farms, and cities could dramatically increase the supply and reliability of electricity in the US, without adding additional carbon to the atmosphere.

The potential gain in electricity supply from “recycling” wasted energy from industry, farms, and cities is enormous. A 2005 report by the Lawrence Berkeley National Lab estimated that the US could profitably reduce our fossil fuel consumption (and carbon footprint) by 20 percent, suggesting that we could generate as much as a fifth of our power needs through energy recycling. The potential profits from capturing this waste are also large. The McKinsey Global Institute estimates returns of $50 billion a year--much of it for steam that now escapes into the sky.

Recycled energy increases the reliability of the grid overall. Because the generators tend to be cited near other power users, they can aid in the creation of a distributed grid, which would make the whole electrical system more reliable and resilient to power outages including those caused by weather, overload, or vandalism. Distributing generators also reduces the line losses caused by long distance transmission of power. In fact the recycled energy generators already on the grid outperform other generators: They make up 8.6 percent of national capacity but produce more than 12 percent of our electrical supply.

Recycling energy generally increases energy production while adding little or no extra carbon to the atmosphere, making it a cheap and quick substitute for wind and solar. Recycled energy can be produced in large quantities, with current technology, and without the daily fluctuations of wind and solar. One single Indiana steel plant is estimated to have produced as many kilowatt-hours of electricity as all of the grid connected solar panels in the world in 2004. In the immediate future, we’d benefit from bringing more recycled energy onto the grid as a bridging strategy while we wait for more advanced solar and wind systems to mature.

Finally, investing in recycling energy retains and even creates jobs in old, carbon-heavy industries. In 2003 the 97-year-old Ethan Allen furniture factory in Beecher Falls, Vermont was looking at moving overseas because of high costs, including energy. Installing a $900,000 plant to recycle the company’s steam into electricity cut power costs by a fifth and kept the company’s 500 jobs in Vermont. It can also create “clean energy” jobs in places where there are few. A study by the American Council for an Energy Efficient Economy found that a installing more recycled energy along with a suite of other energy efficiency measures in Texas could create 38,000 new jobs by 2023.

Why We Need a Federal Clean Power Authority

The US needs to take strong, innovative, coordinated federal action to fully take advantage of the opportunities to recycle power. The barrier to accessing the potential of waste power is neither lack of technology nor lack of capacity, but a combination of counterproductive policies spread across local, state, and federal jurisdictions. Many European countries derive a significant amount of their power from energy recycling, with Denmark getting more than 50 percent. A federal initiative will be necessary to capture this potential in the US because policies and implementation vary widely by state. Case in point: t46 percent of all US recycled generation comes from just four states: Texas and Louisiana (where the petroleum and petrochemical industry uses it to cut costs), and New York and California (where policies have pushed the practice to reduce pollution). Only a federal initiative can overcome the local barriers and split jurisdiction between state utility regulators and the FERC.

And only a dramatically different policy initiative, along the lines of the TVA, which has brought hydro electric power to the Tennessee Valley since the 1930’s, will be enough to realize the enormous potential of recycled power. A patchwork of ambitious federal policies including 1978’s PURPA and utility deregulation has increased the amount of recycled power on the grid seven-fold over the last three decades, but it has failed to capture the larger opportunities. At the state level, the most formidable barriers to bringing more recycled power on the grid are utilities and state utility regulators that refuse to buy the power, impose prohibitively high costs and regulations to connect the power to the grid, or require industrial power producers to purchase an overly large amount of “backup power” at high cost from the utility. In 15 states, the utilities hold a monopoly preventing independent power producers from selling to neighboring homes and businesses directly. While FERC has tried to address some of these issues at a federal level, and some states have tackled them locally, the problems require a coordinated approach. A TVA-like agency, empowered by the federal government, would be able to purchase power directly from producers and resell it to nearby businesses and local government users, bypassing reluctant local utilities and regulators. (And possibly, the simple presence of government-lead homogenous supply would encourage utilities to begin to buy the power themselves.)

A coordinated, innovative agency will also be required to overcome some of the special challenges created by the perverse incentives of regulations such as the Clean Air Act, which discourages the modifications at older plants that would allow the capture of lost energy. In addition, a hodgepodge of taxes and policies support “passing through” energy costs on a yearly basis through tax write offs, while amortizing energy efficiency investments over as long as 39 years. A new federal agency focused on arranging for better local regulation, speedier environmental permitting processes, and more sensible tax laws and policies could overcome these barriers. The CPA can operate as a sort of laboratory for finding the best mix of technology, regulation, and incentives to bring recycled power onto the grid.

Another crucial barrier to bringing more recycled power on the grid is US industry’s investment cycles, which put money into increasing production during good times, and cut back spending entirely during bad, with the result that we invest far less in energy efficiency or energy cost-cutting than competitors in Japan and Europe. This puts US industry at a disadvantage, because it takes us more than twice as much energy to produce a dollar of GDP here than Japan. A large-scale federal initiative, complete with a “one stop shop” for citing, permitting, and possibly funding, will be crucial to raise the profile of recycled energy, and to emphasize the urgency of applying it to local sites. For even greater impact, Congress could fund a loan guarantee program adequate to finance 80GW worth of installation for just $4 billion in exchange for assurances that jobs at the plants will stay in the US. (CK DOE report estimates of funding seem low.)

Finally, an agency on the scale of the TVA would be capable of solving a final barrier to recycled power--expertise. While European companies have engineers devoted to optimizing power consumption throughout facilities, US engineers tend to specialize in one piece of equipment. The CPA will need to work with regional universities to develop engineers, energy accountants, and trained technicians who can work in the region and export their expertise. Because the CPA will be buying the power from producers—whether cities and factories themselves or third party entrepreneurs—the region will also develop business culture around clean power.

Just as the TVA addressed the triple needs for cheap power, economic development, and environmental preservation through the electrification of the Tennessee Valley in the 1930’s, so the CPA addresses the particular needs of the South and Midwest in the transition to a lower carbon economy with more secure energy supplies.

Why the South and Midwest Should be the Focus of the CPA:

Last year’s high energy prices and this year’s recession have hit the industrialized regions of the South and Midwest hard, shuttering factories and sending jobs abroad. Limits on greenhouse gas emissions appear certain to further disadvantage the South and Midwest—regions of the country more dependent on coal-fired power than the rest of the country. First, residents may have to pay more for power when a price is attached to coal emissions. Secondly, the South and Midwest are poor candidates for the wind and solar initiatives that are receiving broad state and federal stimulus funds as well as “credits” from greenhouse gas emitters. (See this map of solar and wind opportunities, which fall mainly towards the coasts and the Southwest: https://www.nrdc.org/energy/renewables/default.asp) Thus, the South and Midwest are getting more of the “stick” of paying carbon charges, and less of the “carrot” of green jobs that other areas of the country will benefit from. Ignoring the unique needs of this part of the country, which is sure to lose in global warming prevention policies, is creating a block of political opposition to the kind of green investment and regulatory measures necessary to make the US economy competitive in a carbon constrained world.

Ironically, the region’s energy-heavy industry, history of utility regulation and coal dependence mean it is a sleeping giant of potential for energy recycling. Wasted energy in the South and Midwest could potentially yield as much profitable electricity as 69 nuclear power plants, according to surveys done by Energy and Environmental Analysts, Inc.

Creating a stimulus program to bring waste energy onto the grid in the South and Midwest is an important way to remodel the region’s “old” industries, preserving jobs while creating new clean energy jobs. Bringing a CPA to the South and Midwest will not only make Southern and Middle states participants in a new clean economy, it has the potential to make them leaders in a profitable low-carbon economy.

The Case for Energy Recycling in Ohio

To understand the potential for recycled energy to change the economic and political dynamics of coal-heavy industrial states, consider the case of Ohio. Ohio gets 86 percent of its electricity from coal, and Ohio industry is less efficient than the national average, with the result that for every dollar of GDP the state emits 37 percent more CO2 than that of the country as a whole. The intimate link between Ohio's economy and energy consumption is typical of the industrial Midwest, where one in five jobs is tied to GM alone. As gasoline prices rose and credit markets contracted, automakers and other energy-dependent industries were hit harder than other parts of the country with a more diverse economies. Ohio has an 11 percent unemployment rate.

Legislatively, Ohio stands to lose a lot from greenhouse gas emissions reductions or fees, which are likely to fall disproportionately on the state’s carbon heavy economy. So it’s not entirely surprising that both Republican John Boehner and Democrat Dennis Kucinich—men with completely opposite political views on the subject-- could afford to vote against the Waxman Markey American Clean Energy and Security bill without fear of angering home state voters.

It's not easy for an old economy state like Ohio to innovate out of its quandary because it has a hard time attracting venture capital and new industries. Relative to GDP, Ohio’s old industrial base means the state gets only $3 in venture funding for every $1000 of GDP it produces, while the US average is $12. Innovation leaders like Massachusetts and California get more than $72 in venture funding for every $1000 of GDP they produce.

While Ohio has some resources for wind power, it is generally not part of the stimulus and tax break driven coastal rush to build wind and solar generation. It ranks 39th out of the fifty states in non-hydro renewable generation. In green jobs, too, Ohio comes up short, with just half a percent of the state’s jobs coming from clean tech, according to a study by the Pew Charitable trusts.

Yet of all the states in the Midwest and South, Ohio has the largest potential for recycled power—more than 8 Gigawatts of generation from waste heat and gases, according to surveys by EEA, Inc. Eight GW is the equivalent of 8 nuclear plants, but of course, not all of the potential will be economically feasible. However, another study by Recycled Energy Development suggests that the state could get 3.3 GW of commercially feasible power from just 59 industrial sites--oil refineries, chemical, paper mills, steel, cement, glass, and natural gas pipeline compressors. Other significant opportunities lie in farms, city waste plants and commercial buildings.

The benefits to the state of Ohio from bringing just 4 GW, or half the estimated potential, onto the grid would be significant. First, it would require an investment of approximately $3.4 billion, which would provide more than 15,000 jobs in construction and engineering. Secondly, it would add a significant source of cheap, low-carbon power to the area’s grid, and the impact of distributing the generation would make the region less prone to blackouts. In addition to its overall reliance on energy, Ohio has been named a “conditional congestion area” by FERC, because its grid is heavily loaded by power on its way to the East Coast. The 2002 blackout, which cut power to 50 million people, was blamed on an Ohio utility, but many of the transmission lines in the area were severely overloaded. Finally, using recycled generation to replace coal fired could avoid the release of as much CO2 as removing 2.07 million cars from the road--equivalent to 22 percent of the state’s cars.

Conclusion:

A South and Midwest Clean Power Authority will target money, attention, and responsibility at a specific part of the country, much the way the ethanol initiative targeted money at the Corn Belt. However, targeting distributed generation at Southern and Middle States has many more advantages for increasing power supplies, cutting waste greenhouse gas emissions, and stimulating the economy than the ethanol initiative.

Importantly, a Clean Power Authority offers a new strategy to connect an emerging “green” economy with our older, industrial one by remaking old, energy hungry plants to be efficient producers of power. This is a remodel not just of the machinery of the plant, but also of the local power grid, which will be strengthened by distributed generation. This will also remodel local economies so that they can retain jobs in older industries, while attracting those in new industries.

 As a stimulus program, installing energy recycling equipment will put jobs on the ground in the parts of the country that need it most. What’s more, jobs in energy recycling are important “bridge jobs” to a green economy, blending older high-end skills like pipefitting with newer energy efficient systems. These are “green jobs” that are not the unskilled “caulking gun” jobs, nor the biotech jobs requiring PhDs.

Finally, creating a Midwest South Clean Power Authority is an important way to remake the political geography of green power to be more inclusive, building broad public support for greenhouse gas emissions control and other clean energy initiatives in the future. The coal heavy states have been unable to get the venture capital or the alternative energy programs to break out of their high carbon economies. Making the region a national leader in recycled energy will target resources and capital at the region, allowing the area to remake itself along a lower-carbon path and changing the politics of the region at the same time.