In a continuing series of one-on-one interviews with opinionmakers, Kentucky Energy Forum recently had the opportunity to pose "10 Questions on Energy" to Governor Steve Beshear. In this exclusive interview, Kentucky Energy Forum presents Governor Beshear's detailed response to our questions.Kentucky Energy Forum: In 2007, Kentucky passed landmark legislation to provide energy incentives for businesses looking to locate in Kentucky. While there have been some amendments to this law, in what ways would you propose, during the 2010 legislative session, to refine/to improve the legislation and to attract new industry to Kentucky?
Governor Beshear: Currently, the Energy and Environment Cabinet is developing and coordinating its 2010 legislative package for my review and approval. Just as in 2009, the cabinet’s proposed legislation will help implement my comprehensive energy strategy, Intelligent Energy Choices for Kentucky’s Future. Working with our state legislators and the Cabinet for Economic Development, we will certainly address new and refined incentives for retaining and attracting industries to Kentucky while at the same time keeping oversight on our state budget and revenue needs. This approach worked well during the 2009 special session and I believe it provides a template for the 2010 regular session. Once I finalize my legislative package for the 2010 session I will share it with all Kentuckians.
KEF: Should the Waxman-Markey Climate Change bill pass Congress and become law what impact do you think ‘cap-and-trade’ would have on the coal industry in Kentucky?
Governor: Per the 2007 – 2008 Kentucky Coal Facts, “Almost 92 percent of all coal consumed in the U. S. was in the electric power sector…” Essentially all coal- fired electric power generation will be subject to regulation in Waxman – Markey. In the short run, given that approximately 50 percent of the electricity generated in the United States is generated using coal, a plan to reduce greenhouse gases will impose costs upon utilities that rely on coal. The alternatives available in the near term to electricity generators to comply with the Waxman – Markey bill would be to: (a) reduce the use of electricity by demand response or similar programs; (b) switch to less carbon-intensive fuels (such as natural gas and biomass); or (c) buy credits to offset the carbon emitted by the generation. The cost of buying credits, which would be passed along to consumers in rates, would increase the cost of coal-fired electricity. All three near-term alternatives would decrease the demand for coal.
The long-term impacts upon the coal industry will depend upon the success of the research efforts into new carbon management technologies and the development of new ways to utilize coal such as coal-to-liquid transportation fuels and coal-to-synthetic natural gas.
KEF: Continuing the discussion on cap-and-trade, what is your plan to support the coal industry should cap-and trade legislation become law?
Governor: There are currently no controls available for the carbon dioxide emitted by power plants. However, the University of Kentucky’s Center for Applied Energy Research in partnership with the Energy and Environment Cabinet, and utilities in Kentucky have formed the Carbon Management Research Group to fund research and pilot projects to study the feasibility of retrofitting existing power plants to capture carbon and to study generation technologies that could more easily capture or reduce/eliminate the carbon emitted per kilowatt hour. In addition to the work on the carbon reduction and carbon capture, the Kentucky Geological Survey, the Energy and Environment Cabinet, and private industry have been actively researching the capacity for geologic storage (sequestration) of captured carbon in Kentucky.
Also, there are many low-carbon options available for powering electric generation (solar, wind, biomass, nuclear, hydro, etc.). As these sources are developed, and as demand for electricity is reduced by improved efficiency (both in consumer use and in generation/transmission), demand for coal for electric power generation will decline.
Supporting the coal industry at today’s coal production rate or higher will depend on developing the industries to produce higher value products such as liquid fuels and synthetic gas as proposed in Intelligent Energy Choices for Kentucky’s Future.
The success of all of these efforts will determine how the coal industry is impacted in the long run.
KEF: In seeking a diversified energy industry and positioning Kentucky to be a leader in a new green economy, what methods would you consider important to ensure Kentucky is a leader in this new green economy?
Governor: As laid out in Intelligent Energy Choices for Kentucky’s Future, I believe that Kentucky will have to succeed in several areas to remain a leader in the energy industry. We need to improve energy efficiency in residential and commercial buildings, we need to develop our agricultural resources to augment coal in the generation of electricity and liquid fuels, we need to develop economic methods of capturing carbon dioxide so that our coal resources can be utilized to continue generating electricity and also to reduce our dependence on foreign oil for liquid fuels. We can also become a leader in manufacturing of new energy products such as solar panel and battery storage for automotive and utility use.
Our efforts in working with the University of Kentucky, the University of Louisville and Argonne National Laboratory to secure a Battery Manufacturing Research and Development Center reflect Kentucky’s effort to lead in this direction.
Kentucky Energy Forum: In your opinion, what are the most viable energy technologies currently available to deploy to benefit Kentucky?
Governor: The most viable energy technologies are energy efficiency (to reduce wasted electricity generation and unnecessary demand for natural gas and liquid transportation fuels); biomass for co-firing in coal-fired electric power plants; nuclear electricity generation; electric cars; and coal-to-liquid (CTL) fuels. These technologies will support the Kentucky coal industry, and increase energy independence and national security by decreasing American demand for imported petroleum-based fuels.
KEF: To reduce costs for State Government, what measures are you taking to reduce energy use, increase energy efficiency, and to transition to alternative fuels?
Governor: To reduce energy usage and increase energy efficiency the state is moving forward on several fronts. These efforts complement strategy one (energy efficiency) in Intelligent Energy Choices for Kentucky’s Future.
As part of a process established under HB2 that passed in the General Assembly and I signed into law in 2008, all new state government buildings or major renovations must be built to LEED standards, with increasing levels of sustainability with increasing dollar amount invested. A core component of LEED certification is energy efficiency.
We are also utilizing Recovery Act funds for several projects: hiring staff to increase the amount of energy efficiency retrofits of existing state buildings through performance contracting; funding a Green Bank revolving loan fund that will support energy efficiency improvements to government buildings; installing energy management control software in 75 state buildings; and investing heavily to expand the existing Kentucky Energy Efficiency Program for Schools (KEEPS). KEEPS is designed to educate teachers and students on wise energy usage, provide an energy manager in nearly 80 school districts to help develop and implement energy management plans and expand technical support to schools. I have also directed that Recovery Act dollars be leveraged to fund solar power on one or two schools being designed as first-in-the-nation net-zero energy schools. These net–zero energy schools are designed to be so efficient they supply as much energy back into the power grid as they draw from the grid over the course of a year.
Additionally, I have set fuel-efficiency goals for state-owned vehicles in Intelligent Energy Choices for Kentucky’s Future to help improve the commonwealth’s energy independence from petroleum-based transportation fuels.
KEF: In what ways do you intend to target ‘energy stimulus funds’ for the greatest benefit to Kentucky?
Governor: Recovery Act funds are being heavily invested in energy efficiency and renewable energy. I am directing funds to be used to improve energy efficiency in state government buildings, schools, agricultural operations, homes, commercial buildings, industrial facilities, local governments and in the electrical grid itself. While not all Recovery Act applications from Kentucky have been approved to date, you can see a complete summary of projects that have been funded with a $52.5 million package under the State Energy Program on the Energy and Environment Cabinet Web site.
KEF: What is your view on the potential for synergy between the agriculture and energy industries to create co-generation opportunities?
Governor: The integration of agriculture and energy is essential for Kentucky to achieve success in a carbon-constrained economy. The Energy and Environment Cabinet is actively engaged with agricultural and academic interests on development of biomass resources in Kentucky. An announcement on the success of this synergy will be forthcoming.
KEF: What measures do you propose to aid Kentucky homeowners in becoming more energy efficient? Would tax credits and tax incentives play a role in that strategy?
Governor: I am proposing several initiatives to help make homes more energy efficient. I have directed the Public Protection Cabinet to review, for possible adoption, the 2009 International Energy Conservation Code, which US DOE estimates could reduce energy consumption nearly 12 percent, saving homeowners approximately $235 per year. Recovery Act funds will be used to support training for code enforcement officials, contractors and others in the construction industry on how to build better homes. Funding will also be provided for hiring HVAC inspectors.
I have worked with Secretary Miller and the Finance and Administration Cabinet to create a Clean Energy Corps that aims to provide weatherization services to 10,000 low- to moderate-income homes over the next three years. Recovery Act funding is providing $72 million to the Weatherization Assistance Program to improve low-income housing efficiency. To reach the middle- to upper-income households, a Home Performance with ENERGY STAR program will be funded in partnership with the Kentucky Housing Corporation and utilities across the state. This program assists homeowners in identifying energy savings opportunities, helps them locate a contractor to make the improvements and verifies that the improvements were properly installed. The average household can expect a 20 percent reduction in energy usage. Kentucky already has a variety of tax credits and incentives for residential energy efficiency. Additionally, rebates provided by selected utilities and federal tax credits can provide up to 30 percent off on eligible home energy efficiency improvement projects. The Energy and Environment Cabinet is also applying for Recovery Act funds to establish a State Energy Efficient Appliance Rebate Program that will provide Kentuckians rebates on their ENERGY STAR appliance purchases.
KEF: Do you consider the construction of coal-to-liquid facilities in Kentucky a realistic option in Kentucky? How would carbon capture and sequestration be managed?
Governor: Developing a coal-to-liquids (CTL) industry is not only realistic, it is highly desirable. It will greatly strengthen the American economy by reducing our dependence on imported oil. CTL will help cushion the American economy from possible supply disruptions and wild price fluctuations in foreign oil. At the same time, it will provide a reliable domestic market for coal, create thousands of jobs in the CTL plants themselves and generate additional thousands of indirect jobs supporting the industry.
Kentucky should displace coal to generate electricity by developing carbon- neutral electricity sources. In turn, that coal should be used to displace imported petroleum by manufacturing diesel fuel and gasoline from the coal. Compared to the current practice of generating electricity by burning coal and making transportation fuels from petroleum, Kentucky will achieve a 30+ percent reduction in carbon dioxide emissions for each ton of coal diverted to CTL, WITHOUT carbon capture and sequestration (CCS). If CCS is ever proven to be a viable technology for carbon control, a 75 percent capture and sequestration of the carbon dioxide made during the CTL manufacturing process will result in an overall decrease in CO2 of well over 50 percent.
CCS from new CTL facilities can be accomplished for a fraction of the cost of CCS from existing coal fired power plants. First, most of the CO2 generated in a CTL facility is captured and compressed as part of the liquid fuels manufacturing process, so there is no incremental cost to accomplish that like there is in a traditional coal-fired power plant. Second, building the CTL manufacturing facilities directly on top of formations most likely to accommodate CCS will minimize the cost of sequestering carbon dioxide from these facilities.
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