Looking Back to Look Forward
By David Bailey, General Manager
The other day I was asked what the new administration’s impact is going to be on the electric industry. That’s a loaded question, so here I go.
As many of you know, I like to look back at history to set a path for our future. I think that’s what we need to do here, too.
The Rural Electrification Act of 1936 established federal loans to electric cooperatives to generate and distribute electric power through the rural areas. The keyword is “loans,” not grants or tax credits.
The government set forth the road map, and electric cooperatives in local communities got the job done. I like to think the REA of 1936 provided the survey for the rural electrification road, and then the local electric cooperatives paved the rural electrification highway. This program has been very successful, so why not follow that plan again?
When you receive loans, they have to be paid back, and electric utilities have one main source of funds: the sale of electricity. Customers must pay back those loans plus interest through their electric rates. The government set up the program, but local business leaders have made this program work through the years. Customers pay their bills for the service they use. Period.
A couple months ago the state of Texas had an extreme winter storm hit the entire state, and over 4 million people lost electric power. How? Texas had deregulated its electric energy market. This market worked well for the electric energy users in Texas until the perfect storm hit this year.
The electric industry must prepare for such extreme weather events by having capacity in reserve. But because the Texas electric market is deregulated, the demand capacity reserves were not prepared, since this cost could not be guaranteed to be recovered through the electric rates. This is one of the reasons why we heard about the extremely high electric bills following the February storm.
It’s important to understand one term to appreciate the challenges Texas faced — baseload, which is the minimum level of energy a system needs in a given time to serve all of its users. That baseload demand level changes with the seasons. When peaks occur during periods of extreme heat or cold, baseloads cannot handle the quick ramp up in demand. Therefore power generators must have peaking power plants that can be brought online quickly to handle the increased demand load.
Baseload power plants do not change their output quickly and can take days to shut down or start up. Examples of baseload energy sources are nuclear, natural gas, coal and hydropower. In the United States, coal power plants are dead, and nuclear and hydropower facilities are almost impossible to build. That makes natural gas power plants the financially responsible way to supply baseload power to the end user in a timely manner. If this administration stops hydraulic fracturing (fracking), then the cost of natural gas generation will increase.
So, let’s talk about green energy. Texas gets almost 25% of its energy from wind. This far exceeds most of the country’s green energy portfolio. Wind, solar and hydroelectric are green energy sources and are considered to be variable or intermittent renewable energy. This variability means they are not considered baseload energy sources. Hydroelectric power is an exception, but this country no longer builds hydroelectric dams.
Texas is my second home state. I went to school there, and I love the state. The wind, which always blows in west Texas, is a good source of energy. But, it cannot be depended on for baseload demand. If green energy is a great source of electric energy, then the government should loan electric generators funds to build these green energy sources and collect those loan funds plus interest through the customer electric rates. I suspect our leaders know that would cause electric energy costs to increase, which is why they offer generators tax credits and grants to construct these resources instead.
In this magazine, you can also read about two men who have given decades of service to your electric cooperative. Trustee Glenn Reeder and Service Foreman Terry Rodgers have both retired, and their presence will be missed. Until next month, be safe and be assured that your electric cooperative is always doing its best to provide you with reliable, low-cost electric energy.
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