A few days ago we looked at how some in the Oil industry are protecting their position – by feeding us education (propaganda?) saying that fracking is okay. Today, I have found a Coal/Electricity industry CEO, FirstEnergy Corp. President and CEO Anthony Alexander, crying that “electricity is under attack,” that there is a “war on coal,” that government interference is stifling growth, and “picking winners and losers” between different electrical system technologies.
In both cases a changing market is presenting challenges to continuing business as usual. The companies that will survive are the ones agile enough to change their business, and it may be that some businesses will crumble and whither.
As for electricity being under attack – that doesn’t make sense. What we want is for more and more of America’s infrastructure, including cars and trucks, to be electrified. Why? Because electricity itself is clean and can be derived from any source. What would be under attack is specific sources from which electricity is generated, like Coal for example.
FirstEnergy Corp. President and CEO Anthony Alexander speaking before the U.S. Chamber of Commerce’s Institute for 21st Century Energy in Washington, D.C. I’m going by a report posted on eenews.net
and the transcript of Alexander’s speech. FirstEnergy is among the nation’s largest diversified
electric utilities, with 10 regulated distribution communities in Ohio,
Pennsylvania, New Jersey and West Virginia.
Alexander’s speech was part warning against new technologies (demand reduction, distributed generation, etc), part defending coal as the best source for electricity, and part extolling Ronald Reagan and supposedly free market approaches to running the country.
According to Alexander, “In the electric utility industry, energy efficiency, renewable power, distributed generation, micro grids, roof-top solar and demand reduction are examples of what “sounds good” – and while they may all play some role in meeting the energy needs of customers, they are not substitutes for what has worked to sustain a reliable, affordable and environmentally responsible electric system.” Or, put another way, gasoline powered horseless carriages sound good, but they are not substitutes for reliable transportation by horse drawn carriages.
Demand Reduction, for example, is a signal that can be sent over smart grid protocols so that participating companies can reduce demand during times the electrical grid is at maximum capacity. It’s meant to keep the grid from overloading and breaking. But, according to Alexander, it’s an example of “a social agenda that has little, if anything, to do with maintaining electric service” and is forcing businesses to consider “whether they can continue to interrupt their ability to manufacture the product they sell in order to accommodate the changes being made in the electric system.”
In actuality, demand reduction when combined with micro-grids, local energy storage, and distributed generation, means that a manufacturing plant could continue operating even if the rest of the grid goes down. Further, plant operators could buy electricity at night when rates are low, store it in an energy storage system, and tap on stored energy during the day to run the factory.
In other words, these technologies reduce the dominance of centralized electricity generating plants. The people who run those plants, like Alexander, are therefore facing business model challenges.
Another challenge to his business model? Efficiency. “Consider the fact that you can no longer buy a 100-watt incandescent light bulb in the United States, but you can purchase a 500-horsepower vehicle.” Why complain about the so-called ban on incandescent light bulbs? Is it because of paranoid right-wing propaganda of government interference, that they’re even intruding into light bulb choices? No. It’s because efficient light bulbs reduce the need for electricity, and in other words reduces the electricity his company sells.
Alexander talked about the economic stagnation since 2008, describing it as the longest such period he’s seen in 40 years in the industry: “We will ultimately work through this… and as the economy grows, so will the use of electricity.”
Is that a given? Efficiency means performing the same quantity of work, while consuming less electricity. It means there could be an economic recovery, with more stuff produced in factories, while electricity sales remain flat.
Might he, then, have a reason to fight against efficiency and other measures that would reduce electricity sales from the fleet of ancient coal fired power plants operated by the company he runs?
We as a society rightfully want to end the use of Coal. Does that mean we, as a society, are attacking electricity? I don’t think so.
He did ask a few interesting questions:
Would you want to compete in a market in which the government can and does suppress the demand for your product?
Or, would you want to compete in a market in which the government subsidizes your competitor?
Or, would you think it is fair to face competition from a supplier who can be indifferent to price… since all of its costs, including a return on investment, are guaranteed?
But what I see in these questions is a careful reframing of the conditions.
Is the government suppressing the demand for electricity? No. It’s suppressing the use of Coal to produce electricity. The threat to FirstEnergy is that their business is dependent on Coal.
As for subsidizing competitors, he must be referring to solar or wind power. Which, both of those have been at a huge cost disadvantage, thanks to a completely uneven playing field, that subsidies are required for solar and wind power to make headway in the market. Those subsidies will phase out over time. The horrendousness of coal usage is so bad that the government needs to invest in alternatives.
By the way – another way to frame this is that coal fired electricity generators are enjoying the advantage of not paying for all the externalized costs. Is that fair?
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