Bob Perciasepe's prepared remarks for the Power-Gen International Conference







DECEMBER 9, 2014


Good morning everyone. Good to see you all. Thank you to PennWell and all the other sponsors for making this conference possible and for inviting me.

The power sector is an important component of the national economy. In fact, we probably would not have the kind of economy we have if it wasn’t for the power sector.

And the power sector continually amazes the country with how it deals with the challenges it faces and the uncertainties -- going all the way back to Mr. Westinghouse and Mr. Edison when they were haggling over whether it should be DC or AC current. Those were uncertain times in the late 1800s. Which way would we go? And when you come forward all the way to today and look at all of the challenges that have been met over the past 100 years, you’re amazed.

We face uncertainties now in the industry, uncertainties of climate change, uncertainties of regulatory programs, and uncertainties of how states may seek to meet emissions targets.

I want to briefly address three of these topics: the risks to the power industry from climate change, the EPA’s proposed Clean Power Plan and what the opportunities might be, and how businesses and states can innovate together.

Let’s talk about the power sector and climate change for a moment. Among many industries in the country, this sector knows firsthand what the climate impacts can be.

Increasingly frequent and intense severe weather events are disrupting power supplies. Energy infrastructure on the coast is at risk from sea level rise. Warmer water temperatures are making it harder to cool power plants. And longer and more severe droughts threaten all parts of the energy system.

Among the examples over the past couple of years: Hurricane Sandy damaged about 7,000 transformers, knocking out power to more than 8 million customers. According to a study by Entergy, hardening Gulf Coast electric utility systems would cost about $15 billion. Drought in the summer of 2012 lowered the level of the Mississippi River to the point that moving oil and coal on the river became challenging.

We see these impacts growing and we know we have to be thinking about them. But we also have to look at the opportunities in the face of these uncertainties.

How can we have policies and an economic model that will let us address these challenges in an economically efficient way? Many support a price on carbon, using the forces of the market to drive innovation and solve problems. More than 1,000 businesses, including some in the energy industry, have joined 73 countries and 22 states, provinces and cities in signing a statement in favor of a price on carbon emissions.

But Congress isn’t ready to enact comprehensive climate and energy policy anytime soon. What we do see is action by states, cities, and businesses to address our climate and energy challenges. Innovation going on in the industry itself. You do not need to wait for Congress for that. Innovation is already happening at the state and city level. And so, we don’t need to wait. We need to look at what we’re already doing and how we can build on that.

In many respects, EPA’s Clean Power Plan is trying to play to the strengths that I just mentioned -- the innovation that is going on in the industry and the innovation that is going on at the state level. Instead of EPA doing the traditional command-and-control approach, they are setting targets and then letting states decide how they go about meeting them. That creates some of the uncertainty that I mentioned earlier. You don’t have to worry about whether it’s AC or DC current. But you do have to worry about how the states will start to figure out, working with the power industry in their states and perhaps neighboring states, how to make use of this flexibility.

We don’t know what the final rule will look like, but we do know the opportunity for market mechanisms will be there. We do know the opportunity for innovation at the business level is going to be there. The question is: How do we capitalize on that?

Many states are already innovating. Ten states have carbon trading programs. That means more than a quarter of the U.S. population lives in a state with a price on carbon. Two dozen states have standards to encourage more efficient transmission, distribution, and use of electricity. Thirty-one states have renewable or alternative energy standards. Utilities in 45 states have net metering to make distributed power more available.

Over time, with the innovation happening at the state and business level, we eventually will be able to find the best in show. And when we do get back to Congress, we’ll have a lot more examples of success.

In fact, that’s how the original environmental laws of the United States were enacted in the 1970s. They were based on work the states and cities were already doing. And I can see that happening again.

But what’s key right now, and the point I want to make sure I make in this talk to all of you, is the great opportunity for you to be working at that state level. There’s been a lot of attention on the proposal that EPA put out and whether the numbers are right and what kind of mix of things they use to set the goals. But you should know that every state in the country is thinking quietly how they’re going to implement this.

I’ve talked to a number of state environmental commissioners -- I used to be one -- and I can tell you that almost all of them are working on this. You have an opportunity to be working with them now. This means putting out ideas yourself and looking at what states are thinking about. For instance, Montana's Department of Environmental Quality recently put out a white paper on potential strategies for reducing emissions -- including increasing energy efficiency and renewable energy, switching some power production to natural gas, and using carbon capture and storage.

Several states have talked to me about the relationship between water conservation and energy conservation. Here’s one example why it’s important that you think about this and maybe talk to your water utilities because they are facing some of these issues as well. The average family of four in the United States uses about 400 gallons of water a day. At eight pounds a gallon, that’s one and a half tons of water. Think of any other product that you would deliver to a house every day that weighs one and a half tons. You provide the power to the water industry so they can deliver that to the American public. In some states moving, treating and heating water is one of the largest uses of energy. So being smarter about our water use could help us be smarter with our energy use.

I had the opportunity to go to the awards ceremony last night, and it was really instructive and it helped clarify one of the key points I wanted to make this morning.

Thirty years ago when I started working in this business, how to get sulfur dioxide and nitrogen oxide down to near zero eluded everyone. In fact, most people in the power industry said we probably can’t do that. That might be an insurmountable goal. Well, last night, people won an award for doing that.

So, sometimes technology does eventually catch up to your problem. The pollution control that has been incorporated into the American electric system has yielded huge public health benefits and quality of life benefits.

Last night, you saw Dynegy is getting down close to zero on sulfur dioxide. NRG is approaching near zero on nitrogen oxide. And NRG just announced it wants to achieve a 50 percent reduction in carbon dioxide emissions by 2030.

So think about 30 years into the future, and the impacts of the technologies we’re working on today. Technologies like carbon capture and storage. Saskpower in Canada has built the world’s first commercial-scale, post-combustion CCS project at a coal-fired power plant. Southern Company is building the first state-of-the art US power plant that will capture and store carbon dioxide. We have some amazing projects and technology being developed in the United States. Last night we saw not only clean coal, but also nuclear plants being built in the United States for the first time in many years by Southern Company and TVA. We saw renewables advancing in companies like Dominion in Virginia, and Duke Energy working on energy efficiency in North Carolina.

All of these things create the diversity that we need in the American power industry. In the final analysis, you really need to be looking at the emissions, not the fuel. You’re not in the one-fuel business: the coal businesses or the natural gas business or the wind, or nuclear or solar business. You’re in all of those.

We have to find ways to power the economy but do it in a way, using the same kind of know-how and innovation that we did in the last 30 years, without damaging the earth’s climate.

One company, one city or one state is not going to solve our climate and energy challenges. It’s going to require everybody working together. And working together is how we can turn these opportunities into reality.

We’re a nation of inventers and innovators. There’s no better example than the work that has happened in the last 30 or 40 years in this industry. Partnering with government and other industries is a way to continue that great success that you have all had.

I’m an optimist when it comes to our ability as a country to solve these multiple inter-related problems. A solutions mindset is what we need. An innovation mindset is what we need. And I think you have proven time and time again that you bring that to the table.

So I’m suggesting to you that an opportunity exists right now to make sure that the state plans that get done are done in a way that lean into this wind that I’m talking about -- that flow with it, go with it, build on it and make it happen. There’s an opportunity to work with your states and create a path forward that will then eventually inform the national debate.

The opportunities are limitless to innovate to address climate change and continue to provide the power that this country needs to be great.

Thank you for inviting me.


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