Charles Schwenck on Alternative Energies |
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Interview with Charles E. Schwenck, Co-chair of Greenberg Traurig's Energy and Natural Resources Practice Editor's Note: Charles E. Schwenck has more than 30 years' experience in energy, infrastructure, and other commercial and industrial projects both domestically and internationally.  You’ve done representation in some rather esoteric areas of energy including ethanol, biodiesel and other synthetic fuels. But you’ve also done conventional energy. Given your range of experience, do you see alternative energy playing a major role in the U.S. or is it likely to always play a minor role?CS: First, let’s define our terms. What is “alternative energy?” The narrow definition often used in public debate would include wind, solar, biomass, hydroelectric, geothermal, wave and tidal electric power generation and non-hydrocarbon based fuel, (e.g. ethanol, biodiesel and other biofuels) production. Nuclear energy is often treated separately for a variety of reasons. However, it is clearly an alternative source of energy in that it is the use of non-hydrocarbon based fuel, which produces electric power without emitting greenhouse gases. To this I would add alternative uses of traditional hydrocarbon based fuels (such as coal gasification and liquefaction, as opposed to combustion) and use of non-traditional hydrocarbon based fuels such as oil sands and oil shale. Even using the broad definition, alternative energy is not going to replace the use of hydrocarbon-based fuels for transportation or electricity generation in my lifetime or in a couple of generations thereafter. However, it will play a much larger role than it does today, and it will play a significant role in the reduction of greenhouse gas emissions and our reliance on foreign petroleum products. The role of wind power is expanding rapidly and will continue to do so for at least the next couple of decades. The two major impediments are (1) the lack of sufficient transmission capacity to get electricity from the wind resource areas to the places where the electricity is most needed (“load centers”) and (2) inconsistent and short-term approaches to governmental incentives which result in insufficient market predictability to support price stability for wind turbines and related components. While the cost of producing wind power has been rising due to inconsistent and unreliable incentives, the cost of solar power is coming down rapidly. Furthermore, its cost effectiveness can be enhanced by applying it in a “distributed” fashion through small installations on rooftops, reservoirs, etc., which reduces the need for additional transmission capacity. However, both wind and solar suffer from being intermittent resources which cannot be called upon “on demand” for base loads 24 hours per day. Usable hydroelectric and geothermal resources are limited. All in all, it is difficult to see how these alternative means of generating electricity will account for much more than 25 percent of our electricity needs within the next 20 years. However, significant advances in energy storage technology, whether it be advanced batteries, compressed air, variations on pumped-storage hydroelectric (whereby hydroelectric resources are recycled during off-peak hours and “stored” for release during peak periods) or others, could drastically change this prognosis by making intermittent generation resources useful for base load planning. Alternative fuels will not play a significant role unless and until they can be produced efficiently from non-food resources. Advances in biofuels production from such feedstocks are being made every day, but costs are still high. Fuel cells are a long way off, and it is important to note that while the use of electricity to power cars (whether alone or in hybrids) reduces the use of carbon-based fuels for transportation, it does little to reduce our overall carbon footprint by itself. Such a reduction requires a shift to alternative energy for production of the electricity that fuels electric vehicles and is consumed in great quantities to produce batteries. In order to both achieve the reductions in our carbon footprint currently being proposed in Congress and achieve energy independence ... which I will define not as eliminating the use of hydrocarbon fuels but, rather, as matching our need for hydrocarbon-based fuels to our domestic capacity to produce them without increasing uses of other imported energy resources ... clean coal technologies and nuclear power must be included in our energy mix. U.S. coal reserves are among the largest in the world, and gasification of coal to produce electricity and liquefaction of coal to produce transportation fuels are not new or novel technologies. They have been around since the early 20th century, Germany used them to achieve a degree of energy independence during World War II and South Africa used them to achieve virtual energy independence starting in the late ‘70s. However, these technologies are not competitive economically, and removal and sequestration of greenhouse gases in the gasification and liquefaction processes has not been achieved in past applications at the level now demanded by our greenhouse gas reduction goals. Nuclear power has been controversial in this country, but it is an extremely clean form of energy virtually free of greenhouse gas emissions and has been safely and reliably utilized for many years, especially in France and Japan. If the new nuclear plants currently planned and in the licensing process are built, nuclear will play a very significant role. However, concerns regarding costs, regulatory uncertainty and spent fuel storage may derail the nuclear industry in the U.S. The likelihood that clean coal technologies and nuclear power will play a significant role and allow us to achieve both energy independence and our greenhouse gas reduction goals will depend on the extent to which greenhouse gas reduction legislation at the federal level effectively places a sufficient cost on production of greenhouse gases to allow those technologies to achieve economic parity with current alternatives. If such economic parity is achieved, I am confident that at least coal gasification and liquefaction (if not nuclear) will play a significant enough role that we can achieve energy independence (as I have defined it) in the next 25-30 years. Have any of the above ventures come to fruition in specific projects and if so, can you tell us about them? CS: After more than 30 years experience, I would have to say that the record is mixed. However, great progress has been made. I was fortunate enough to have been involved in the successful construction of the South African gasification and liquidification plants and the development of the first Canadian oil sands projects, each of which continues to operate highly successfully today. On the other hand, I spent a lot of my time in the early ‘80s in efforts to apply exciting new technologies to the production of synthetic fuels from coal, petroleum coke, oil shale and the like, and most of those efforts were abandoned when the price of oil dropped to a level which rendered them uncompetitive. We simply did not have the political or public will to become energy independent, although the means were available. I was involved in the first commercial scale U.S. solar project, which went through significant difficulties (including bankruptcy) but it is now successfully operating and has led to several hundred new megawatts of solar capacity being built and more than 1,000 megawatts being contracted for in California alone. I was not involved in many of the early wind projects, in the ‘80s, but my involvement in the past few years has been successful and rewarding. Projects in which I have been involved have added close to 1,000 megawatts in the Pacific Northwest, California and Texas, and there are many more on the way. I have been involved in new cellulosic biofuel production, significant advances in solar technology here and in Europe, and new wind power technologies. I am particularly excited about a couple of coal gasification/liquefaction projects in which I am involved, because they will use the C02 removed during the process to recover vast quantities of domestic oil which would not otherwise have been recovered from nearby, existing, “depleted” oil fields. Projects like these could truly be “game changing.” You’re based in Southern California. Would you like to see the entire state blanketed with solar arrays? CS: No, nor is that necessary for solar power to meet its promise. There will be utility sized solar projects built in the deserts of California, Nevada and Arizona and elsewhere, but the real promise of solar is in distributed applications on rooftops and on bodies of water and elsewhere which will use little land and, equally as important, require little additional transmission capability. In fact, some of these applications may actually improve the capacity and reliability of the existing transmission system by moving the source of power production closer to load centers and turning current net users of electricity into net producers providing excess power to their neighbors. One of my pet projects is an entire “green” planned community of several hundred thousand residents in California wherein every home and business will produce and efficiently use energy and the community as a whole will be a net producer of power to the grid. This is based on green building concepts, extensive use of solar and water resources and advanced energy storage concepts. With regard to alternative energy, are there any changes you would like to see in the laws or policies at the national and state levels? CS: Whatever degree of belief (or disbelief) I may have about the existence, extent or rate of or humanity’s effect on global warming, I believe that the imposition of a significant cost on the production of greenhouse gases or the creation of significant incentives for avoiding the production of them is essential to our ability to bridge the cost gap between current energy technologies and alternatives such as wind, solar, coal gasification and nuclear power and thereby achieve an acceptable degree of energy independence. Whether one views our current reliance on imported oil as an issue of environmental policy, national security or economics ... the transfer of wealth from populated productive societies to countries without the population or political systems to put such wealth to beneficial use is staggering when oil prices are high ... the current situation is not sustainable. Whether the approach at the federal level should be a carbon tax or a “cap-and-trade” system is open to debate. Certainly a carbon tax is more transparent. However, I worry about whether the revenues from such a tax would be efficiently put to use to promote our national energy goals. I have also seen some of our clients use current opportunities to create and trade carbon credits (whether compliance credits outside the U.S. or voluntary credits within the U.S.) to drive extremely important environmental benefits and advances in efficiency which I do not believe would have occurred under a carbon tax regime. At the state level, I think renewable portfolio standards have been helpful but very inefficient. Reliance on utilities to procure renewable capacity and energy has not worked well. I believe that a true feed-in tariff such as those used in Europe for wind and solar generation would be more efficient. I also believe we need to rethink the purpose of renewable energy credits. We need to recognize that alternative energy serves both an environmental purpose and energy independence/diversity purpose. Therefore, it may make sense to allow both carbon credits for environmental purposes and renewable energy credits for energy diversity purposes for the same activity. This is typically prohibited or extremely difficult today. I had hoped that the renewable energy incentives contained in the Energy Policy Acts of 2005 and 2007 evidenced the beginning of the political will which has heretofore been lacking to achieve energy independence. However, many of those incentives required further federal implementation which has come slowly, if at all. The incentives in the 2009 (Obama) economic stimulus legislation are aimed at “shovel-ready” projects and, therefore, must be implemented rapidly. If successful, they could pave the way for better implementation of the earlier, longer-term incentives, many of which were extended in the 2008 (Bush) economic stimulus legislation. While just about everybody likes the idea of alternative energy in the abstract, do you find much opposition when it comes to specific projects? CS: There will always be a “not-in-my-backyard” response at some level, whether one is trying to build renewable energy facilities, industrial facilities, commercial facilities or residences. We have seen reactions to so-called “sight blight” from wind turbines, especially in coastal configurations, and we will certainly see resistance to new nuclear facilities. However, alternative energy is acquiring an aura of political correctness which is having a strong modifying effect on the power of “Nimbyism.” Is there anything else you’d like to say about alternative energy? CS: In typically lawyerly fashion, I have said more than was asked of me. I hope that my comments are sufficiently controversial and thought-provoking to stimulate healthy debate on the subject of alternative energy. Mr. Schwenck has testified on behalf of the engineering, construction and electric power industries before various congressional committees and state legislative bodies. He has served as senior vice president and general counsel and as a board member of LG&E Power systems, as general counsel at Fluor Corp. and as division counsel for the Bechtel Group's Power Division.
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