Roanoke Times
Copyright (c) 1995, Landmark Communications, Inc.
DATE: SUNDAY, July 1, 1990 TAG: 9007020262
SECTION: EDITORIAL PAGE: C-3 EDITION: METRO
SOURCE: RICHARD E. DISBROW
DATELINE: LENGTH: Long
Some have been attempts at true national policies, setting out comprehensive plans for all of the sources and uses of energy in this country, only to be countermanded by succeeding administrations or rendered obsolete by changed circumstances. More frequently, policies have been adopted to encourage or discourage a particular energy source or use, without regard for effects on other energy sources, or for environmental or economic impacts.
In the electric-utility industry, durability and continuity have not characterized government policy. In the mid-1960s, for example, the federal government promoted the nuclear option, and the industry invested billions of dollars in nuclear facilities.
However, constantly changing regulations, exacerbated by Three Mile Island, sent the cost of nuclear plants soaring and lengthened the lead times for licensing and construction to about 14 years. Cost and uncertainty forced many electric utilities to cancel plants. Some that completed their plants, budgeting them according to the best available knowledge, were later faced with the prospect of disallowance by regulators of portions of the higher construction costs. Utilities grew understandably wary of nuclear power, and have placed no new orders for more than a decade.
With the passage of the Clean Air Act in 1970, electric utilities were urged to shift their generation facilities away from coal to oil and gas for environmental reasons. Only three years later, after the Arab Oil Embargo, the use of oil became anathema. The government formulated elaborate plans to get utilities to switch back to coal, at the expense of utilities and their customers.
In 1978, the decades-old system of price controls on natural gas came to its logical conclusion: shortage. Congress promptly prohibited the use of natural gas by electric utilities for new plants.
Through all the changes, coal has remained the backbone of the electricity-supply system. Coal produces 57 percent of our electric energy supply, and its supply is virtually limitless. The utility industry has spent billions of dollars to meet environmental standards for coal-fired plants - successfully. In 1987, according to the Environmental Protection Agency, total sulfur dioxide emissions were down 21 percent from the '70s despite an 85 percent increase in utility coal use over the period. Other emissions and waste products have been simimlarly curbed.
Yet acid-rain and global-warming legislation loom, casting doubt on future use of coal. New restrictions would require new environmental controls, adding significantly to the capital cost and possibly pricing coal out of the marketplace. The electric-utility industry and the U.S. Department of Energy have invested heavily in clean-coal technologies, but the industry may simply not be in a financial position to make the investment to deploy them if other environmental costs are too heavy.
Meanwhile, the wheel has swung around again. Natural gas is now in adequate supply, and the prohibition on its use for electricity generation has been repealed. Gas is viewed in many quarters as the preferred fuel for new generating capacity. This presumes that the U.S. possesses an abundance of gas and that adequate pipeline capacity will be available.
That may be true, but proven reserves total only nine years' worth at current price levels. Utilities gambling heavily on gas may run into higher prices, at least, and possibly shortages in years to come.
With no restrictions on importation of oil, and prices low, some East Coast utilities are turning back in desperation to that once-discredited source, with its attendant national-security risks.
Lately, environmental concerns are prompting a revival of interest in nuclear power. Indeed, new and inherently safer nuclear technologies are appealing and emission-free. But utilities are understandably reluctant to make the huge investment without some assurances that they will not be financially penalized in the future.
Neither energy, nor environmental, nor economic policies can any longer be made in a vacuum. Everyone is in agreement that our environment is precious, but we must balance our environmental objectives with other national goals. If we unduly restrict energy use or increase its cost excessively in the name of environmental protection alone, we will adversely affect our standard of living and hobble our industrial base as it faces increasingly intense foreign competition.
No plan or policy is immutable. However, we must remember that new energy systems, of whatever kind, are capital intensive and therefore extremely costly. And they involve long lead times. If providers of energy are to attract the necessary capital, on reasonable terms, investors must have the assurance that the projects they fund will be viable; that the "rules of the game" will not change dramatically, as they have in the past; and that reasonable management performance will bring the opportunity to earn a fair return on investment.
No fuel supply is perfect. Coal emits sulfur dioxide. Coal, gas and oil contribute to global warming. Nuclear power, though not a pollutant, has disposal concerns. An energy policy must recognize the inherent characteristics of each and accommodate them all.
A policy that creates overreaction by responding immediately to sudden shifts in the market, or even to news bulletins, will not serve the country well over time.
A cogent national energy policy must be coordinated with other national priorities and, if subject to change, the changes should be made slowly so that our energy supply can adjust gradually to whatever new direction is set.
Of primary importance, however, is that once the direction is set, it is followed consistently.
by CNB