Text of remarks I gave to the the Oklahoma Academy on Feb. 25.
Over the years, Oklahoma state leaders have messed up a number of policy solutions, and I can say this with some authority having served as Governor 18 years ago and contributed my share of mistakes.
I distinctly remember failing to convince the Democratic leadership to invest in literacy, drug rehab and job skill training for inmates, while we had their captive attention, to reduce recidivism and lower our prison population. Then and now we insist on the politically easy solution of just locking up everyone that our constituents are mad at instead of those that are real threats to us – winning us another national title of dubious distinction and creating an unnecessary drain on our budget.
The unwillingness to deal responsibly with the sale of water to Texas is another doozey of a mistake. As Texas presents a winning case to take the massive surplus of water from Oklahoma for free, we in Oklahoma refuse to negotiate the sale of what would be billions -- and I mean billions with a “B” -- of water to Texas every year…simply because the idea of “selling water to Texas” is politically radioactive.
So our leaders wait to be forced into giving the water to Texas rather than creating a massive new revenue stream for Oklahoma that can be used to lower taxes, increase education funding, improve health care access or any number of other good ideas.
Our unwillingness to monetize our unproductive and unnecessary state government assets that would generate a billion dollars for an endowment. This was how the billion dollar EDGE endowment was to be funded. Instead, we are dribbling in taxpayer monies into this fund intended to make Oklahoma the research capital of the country, similar to the very successful research park that began 16 years ago at the Oklahoma Health Center.
Meanwhile, the state fails to benefit a whit from a billion dollars of value in the GRDA, the State Insurance Fund, an industrial park and millions of square feet of non-historic real estate that should be sold to those who can take advantage of depreciation and then lease back to the state at rates that are less than the current cost.
And so the list goes. . .missed opportunities, missed chances to ride natural waves of success, whether it is technological, environmental or just opportunistic, as the so-called “good deals” come and go.
Now I have become what the New York Times columnist Frank Rich would call a beefy, beer drinking, deer hunting white guy. But I have also been an intense student of public policy for 30 years in this state. I have strong opinions, and I share them with you today because I care about this state which is home to my family and yours.
I really want us to get energy policy right. Let’s talk about wind first.
My company has recently opened an office in Newport Beach, Calif., to support the work we are doing on renewable and low emissions energy projects. My youngest daughter, who is an industrial engineer who just joined my firm, traveled with me last week to California to check on our projects.
The reason that my company is paying rent in California, paying airfare to get to California, hiring staff in California, retaining engineers in California, contracting with construction companies and hiring operations and maintenance companies in California and paying California taxes is that California pays us $110/MWh for our renewable production. In Oklahoma, we would be lucky to get $30. Our work in California relates to biomass gasification, digesters, fuel cells, carbon sequestration, blended biofuels with natural gas and a patented emissions system that I don’t have in this speech to brag about.
This it all could and should happen here in Oklahoma, but it is not economically viable.
You will soon find it relevant to know that I am not in the wind power business and do very little business in Oklahoma, and I do not own or work for any natural gas companies.
Do you ever notice how often you have to stabilize yourself to enter buildings because of the wind? Or how often those of us with thinning hair look like Kim Jong Ill of North Korea with hair standing on end? When I was a kid, running a tractor without fenders in Oklahoma, the wind would take the dirt carried up to about ear level on the large tire lugs and blow it straight onto my face, filling my ears and eyes with that famous red dirt. As a kid I thought the entire world worked eight to ten hours a day with red dirt blowing in their faces. Only later did I realize how “fortunate” we are to be in the middle of this North American land mass with the dynamic jet stream movements and frequent weather changes that make Oklahoma windier than most. Our wind currents are the envy of most states in the nation.
Let’s take a quick look at a chart to illustrate Oklahoma’s current potential.
Table 1 from Paper 4, Version Date 9/13/02, Oklahoma's Wind Resource: Economic Analysis
http://www.ocgi.okstate.edu/owpi/OKWindInfo/OWPI_documents/OK_Economic_Analysis.pdf
This is a very conservative estimate, done in 2002 and used in the 2003 Oklahoma Academy Town Hall meeting on Oklahoma Resources, Energy and Water. However, it remains the definitive report listed on the Oklahoma Wind Power Initiative website. I believe the cost of wind power capital investment is now much more, and frankly, with new wind turbine technology, I believe that density assumptions can be increased so that an updated version of this table should look like this:
I should note that I am using the California rate for renewable energy, which does not include emissions credits and a variety of other tax incentives. My utility friends here will say that it is their job to deliver power at the cheapest possible rate. I respectfully disagree, and as politically incorrect as that is to say, I believe the utilities’ job is actually to:
1. Provide efficient power production that does not damage our environment or create indirect health costs from pollution.
2. Assist with the creation of jobs and economic activity and the general improvement of our quality of life.
The fact is that California and most of the rest of the country have come to the realization that electricity – whether it costs 8 cents or 12 cents – is still a bargain. Most countries are in the 20 to 30 cent range. Texas consistently has retail electricity rates for all sectors about 3 cents per kWh higher than Oklahoma, or nearly 40 percent more. (We see how it has destroyed the Texas economy, which actually, of course, runs circles around the Oklahoma economy!).
So do we do like we did nationally with our transmission fuels – always select the cheapest alternative so that we wreck our economy and endanger our nation with foreign oil imports. Or do we look to the future and do the smart thing and build a new energy system?
Our wind currents are so strong in Oklahoma that the statistics reviewed earlier assume
NO DEVELOPMENT in that part of the map marked “fair,” the same types of conditions that many other states are developing in. If this “fair” area were included, we would essentially double these numbers. Is that possible?
The Pickens Plan that has been touted by that great OSU booster (who I had the privilege of visiting with on Monday in Washington) cites 725 billion kilowatt hours as being the wind power potential for Oklahoma. This is not a new number. It was originally developed in 1991 by the Pacific Northwest Laboratory. This number was also used by the Academy at its 2003 Town Hall. This is the number that puts Oklahoma in 8th place in the nation, with Texas at number 2 with 1,190 BKWh potential, and California at number 17 with a puny 59 BKWh potential.
So let’s see how this well used potential matches Oklahoma’s official estimates in the past…
Conversion of Billions of kWh to potential name plate capacity
Billions of kWh
725
Average MW required to produce this at 100% capacity and availability
82,763
Capacity Factor Assumption
33 percent
Availability Assumption
95 percent
MW Name Plate Capacity Necessary to produce 725 Billion kWh
263,995
Multiple of most aggressive prior estimate for Oklahoma
13
Remember the other charts – with 17K MW and the 20K MW?
For the love of Pistol Pete, we missed it – or maybe Boone missed it – by a factor of 13. But let’s assume Boone is right. What would that mean for wind turbines in Oklahoma?
Number of Towers required
4 MW per tower
65,999
Density Assumption
20 percent
Number of Sq. Miles Covered
6,900 sq. miles
Number of Towers on every 5th section in half of Oklahoma
10
Ok. I am thinking that is not going to happen. Boone and others may be too aggressive by working with the 1991 authoritative study on this matter. But lets assume that we can in fact support 20,000 MW (less than 8% of the above) of name plate capacity.
This VERY conservative estimate results in $24 billion of investment, $6 billion in annual economic activity and nearly $200 million in lease payments in a desperately poor area of our state. Those are huge numbers . . .thousands of jobs. . .billions of dollars. No wonder our state policy leaders and utilities are knocking themselves over to reach this potential!!
Oh,wait. I’m sorry. Maybe “knocking themselves over” is a little too strong to describe what we actually have been doing.
In 2003, when the Academy shined its light on this huge opportunity, Iowa, a state with 25 percent less wind capacity than Oklahoma, had already built 422 MW of wind generation. Texas, which has about 65 percent more capacity than Oklahoma, had built 1,095 MW of wind generation. Oklahoma had yet to build a single MW.
OK, we got a late start. Or perhaps it was just a pain for the utilities finally to accept a wind generation project. Whatever the reason, surely by today we are doing better. Yeah, right.
Nationally, we have done great! Last year in 2008, 42% of all new power additions in the U.S. were wind generators, adding a whopping 8,358 MW of generation capacity and bringing the country’s total to 25,170 MW. Seven states now have entered the club with over a thousand MW of generation.
Texas, our nemesis, to whom we refuse to sell water is unfortunately number one with 7,116 MW. Even Iowa, with 25 percent less capacity than Oklahoma, now has 2,790 MW. California, with only 8% of our capacity,has 2,517 MW.
And Oklahoma … wait for it … Oklahoma, with only 707.9 MW, is not on the top 10 list. How is that possible? Wisconsin and Oregon are both on the top 10 list, and the last time we checked the wind doesn’t even blow in those states.
There are 85,000 jobs in the industry now, 70 new wind generation component manufacturers, and Oklahoma is trailing the pack.
Not to pick on OG&E, but it is our largest utility, and we look to them for leadership in these matters. The OWPI newsletter for January/February reports that OG&E has only 170 MW, 50 from FPL Energy, one of their fellow utilities, and 120 MW that is owned by OG&E from only 114 turbines in two counties.
So let’s cut to the chase.
We are not developing this incredible asset that can bring billions of development, thousands of jobs and hundreds of millions of dollars to poor farmers in Western Oklahoma because the utilities in Oklahoma have successfully fought off renewable portfolio requirements, any significant payments for net metering and most other innovations that are moving across the rest of the nation like a wild fire.
Here is how bad it is: one of our three utility regulatory commissioners in the recent past offered a motion to establish renewable portfolio requirements, and it does not get a second. A motion is offered for voluntary goals, and it dies for lack of a second.
The utilities don’t do this because they don’t have to. And the regulated world, why in the world would you mess with these troublesome wind power plants when you can add $1 billion dollars to your capital return rate base by building a massive coal plant and burning a toxic fuel from hell that will enrich folks in Wyoming and leave our abundant supply of natural gas wanting in Oklahoma?
Transmission is another tremendous challenge for Oklahoma, but perhaps not in the way you would imagine. The Southwest Power Pool, more than any other distribution system in the nation is controlled by the utilities, and its actions tend to protect the utilities’ interests rather than quickly moving efficiently produced power in Oklahoma.
Witness the development of the Redbud and Onetta Power facilities. This horror story was brought to my attention by a New York financial house as the reason they would never invest in a merchant plant in Oklahoma. Planned were nearly two billion dollars of investment in these two plants and 2,000 MW of power generation capacity that would have burned huge amounts of Oklahoma natural gas.
But they were choked off by the utilities’ refusing to allow them to move power over their lines by using arcane rules designed to thwart power sales by slowing down the SWPP approval process until they bankrupted these assets. These two plants are the most efficient power plants in Oklahoma with 7,200 BTU per kWh. Recently, the utilities were able to buy Redbud. Today Onetta – 1,100 MW of efficient natural gas fired power, is choked down to only 15 percent dispatch while the utilities fire off Wyoming burning coal plants at twice the inefficiency, not to mention the millions of pounds of particulates, toxins and carbon emissions they are spewing out.
You often hear the excuse that, “Gosh, we sure wish we could build more wind generation but we just don’t have the transmission lines.” This one makes me grind my teeth. First of all … it is as though we somehow can transmit a kW through the air if it is produced by one of these thermal plants. Any new generation requires connection to the grid. But wind generation is spread all over the place!
Have you looked at that map? We actually have a very concentrated area for wind generation, so why not build the line! Because OG&E wants us, the rate payers, to pay for it in advance, similarly to the way it wanted to finance that coal plant that was rejected by the corporation commission last year.
But wait. A new company called ITC, the nation’s only independent transmission company, has offered to build the wind generation lines and put them in the Southwest Power Pool so that all of the rate payers in this multi-state area would bear the cost of this extension.
That is the reason we have utility companies, and this is the way it is supposed to work – extensions paid by everyone, not by the poor bloke at the end of the line. But in order to stifle the competition from ITC, OG&E has now said it will build the line, which gets rolled into their rate payers base and not spread out under the SPP regime.
Suffice it to say that very little innovation will occur in our electrical generation businesses until we decouple the transmission from the generation, which will eventually happen.
Now a word about efficiencies. Why do we not have a nega-watts program in Oklahoma like those in so many other states, administered by the utility, which is paid for its efforts. It works like this: instead of spending $1,000 per kW of capacity and a billion dollars for a 1,000 MW power plant, give me $500 per kW for every certified improvement in my efficient use of power in my factory, home or office.
This removes the need to build another 1,000 MW of power by removing 1,000 MW of demand. The utility gets to add into their rate base the return on their investment and cost of administration, and we all save a ton of money.
We talk and advertise this to death, but still no action. Saving energy through efficiency is less expensive than building new power plants. Utilities can plan for, invest in, and add up technology-based energy efficiency measures and, as a consequence, defer or avoid the need to build a new power plant. In this way, Austin, Texas, aggregated enough energy savings to offset the need for a planned 450-megawatt coal-fired power plant. Austin achieved these savings during a decade when the local economy grew by 46 percent and the population doubled.
In addition, the savings from energy efficiency are significantly greater than one might expect, because no energy is needed to generate, transmit, distribute, and store energy before it reaches the end user.
Finally a word about natural gas power plants.
A well known Oklahoman, Robert Hefner, has a new book out called The GET, Grand Energy Transition. It describes the transitions from old fuels to new, and how we have moved on from solids to gases.
This book is getting a lot of notice in Washington. John Podesta with the Center for American Progress rolled the book out this month, along with a roundtable discussion earlier in the day at the Aspen Strategy Group.
Here is what was said by former Secretary of Energy Jim Schelsinger, who actually opposed Hefner’s 1970’s efforts to convince the US Congress of the abundance of natural gas:
“For years Robert Hefner challenged the conventional wisdom in industry and government regarding natural gas reserves and production potential. His position was treated with skepticism when it was not dismissed out of hand. Yet, time has proved him right, particularly as shale gas has contributed to a 9% jump in domestic production in just this last year. He was proved right on the Fuel Use Act. Some of his propositions regarding the (unavoidable) energy transition will be questioned, but they surely should
no longer be dismissed out of hand."
-JAMES R. SCHLESINGER, Economist and former U.S. Secretary of Energy, former U.S. Secretary of Defense and former CIA Director; appointed in 2002 to the Homeland Security Advisory Council, and consultant to the U.S. Department of Defense.
This is important because in 1974, the big oil and coal companies convinced the Congress that the U.S. only had 300 TCF of gas left, and so they rationed the use of natural gas. Oklahoma went from 90% natural gas generation to now producing half of our power from coal.
Ironically, the U.S. has produced nearly 600 TCF of gas, and today many experts believe we have 3,000 TCF of developable gas reserves in the US and much more throughout the world.
Now that we know, thanks to companies like Devon and Chesapeake and their shale gas discoveries, that we have at least a 100-year supply of natural gas. Now we know we can build these combined cycle natural gas fired power plants to produce power more efficiently, cleaner and, yes, for less money than coal.
Now we know that eventually coal is going to have to pay for the fact that it pumps out twice the amount of carbon than natural gas, not to mention incredible loads of particulates and other toxins – and we have technology to carbon sequester natural gas and that is not available with coal.
Now we know that coal is going to be harder to mine and more expensive over time, and now
we know the incredible environmental and health damage wrought by coal burning and that we are awash in natural gas and have very little coal, then:
Why on God’s Green Earth, excuse the pun, would ANY Oklahoman EVER advocate the burning of coal to produce a single kWh?
The headline in the Sunday New York Times on February 15 was “Is America Ready to Quit Coal?” The answer should be a resounding yes, and yet the Times set the debate between coal and wind power and never mentioned in its full-page article, not once, was natural gas mentioned. Oklahoma and the nation still struggle against the errors of the 1970s to restrain Oklahoma’s job-producing natural gas.
Meanwhile it is business as usual in Oklahoma. Utilities are filing for rate increases, we are inefficiently burning coal for nearly half of our generation, and efficient clean burning natural gas plants are shut in. Transmission improvements look more like competitive maneuvering than an actual attempt to provide more efficient electric highways….and our prisoners are still not receiving programs, GRDA is still owned by the State and Texas will soon have our water for free
Sadly, Oklahoma is not the NEW ENERGY FRONTIER…it is just the ENERGY FRONTIER with horse-and-buggy, wild-west approaches to development – do whatever is easiest and cheapest in the near term, refusing to adapt or take advantage of Oklahoma’s natural resources, including its people.
We are now saddled with a legislature that when faced with budget cuts, a health care crisis, inadequate school funding and prison issues prefers to spend time on placing a granite religious monument on the Capitol grounds, banning a pastor’s prayer from the House Journal and expressing opposition to a non-existent plan to house Gitmo prisoners in Oklahoma.
Fortunately we now have a national government that gets it. I thank God every day for the reprieve we are now enjoying whereby national security, financial recovery and energy policy teams are led by experts, rather than ideologues, who understand the value of moving more aggressively into alternative energy, better transmission policies, decoupling and a host of incentives to get us into the future without destroying our economy or our planet.
I greatly appreciate the privilege of sharing my thoughts with you today. I hope I have stirred a thought or perhaps even a debate. Thank you.
Recent Comments