Progress of Renewable Energy in Kansas

State of Renewable Energy in Kansas Presented by Jim Ploger Director of Energy Efficiency & Renewable Energy Kansas Energy Office USDA ENERGY CONFERENCE Kansas State University Student Union – Jan 30-31, 2007 Energy Issues were prominently featured in State of the State Address by Governor Sebelius… “Our goal is to produce 10 percent of our state’s electricity from wind power by 2010, and 20 percent by 2020. ” ….State of the State Address, Jan. 10 1 More on energy issues … “I’ve also asked energy producers to undertake a statewide consumer education and conservation effort to reduce consumption 5 percent by 2010, and 10 percent by 2020.” ….State of the State Address, Jan. 10 Executive Directive No. 07-373 … “I am directing the Department of Administration and the Kansas Corporation Commission to immediately initiate an evaluation of the advantages for the State to become a member of the Chicago Climate Exchange (CCX). The CCX membership would require a commitment on the part of the state to reduce carbon dioxide emissions to an agreed upon goal through energy conservation practices and/or the increased use of clean and renewable sources of energy. Failure to meet agreed upon goals would result in financial penalties.” ….Governor Kathleen Sebelius, Jan. 10 2 President Bush……. “It's in our vital interest to diversify America's energy supply -- the way forward is through technology. We must continue changing the way America generates electric power, by even greater use of clean coal technology, solar and wind energy, and clean, safe nuclear power.” ….State of the Union, Jan. 23 “Let us build on the work we've done and reduce gasoline usage in the United States by 20 percent in the next 10 years. When we do that we will have cut our total imports by the equivalent of threequarters of all the oil we now import from the Middle East. To reach this goal, we must increase the supply of alternative fuels, by setting a mandatory fuels standard to require 35 billion gallons of renewable and alternative fuels in 2017 -- and that is nearly five times the current target.” ….State of the Union, Jan. 23 3 The Kansas Energy Council is charged with development of a comprehensive state energy plan that includes information about the state's energy resources and recommendations on longterm energy policy to the Governor, Legislature, and Kansas Corporation Commission. KANSAS ENERGY COUNCIL CO-CHAIRS Ken Frahm, Represents Generators of Electricity from Renewable Energy Resources - Mark Parkinson, Lt. Governor Richard Anderson Represents League of Kansas Municipalities Roderick Bremby Secretary of Health and Environment Tim Carr Designee of the State Geologist Patricia Clark Designee of the Secretary of Commerce David M. Dayvault Represents Energy Tax and Revenue Specialist Sarah Dean Represents Environmental Issues related to Energy Production Joe Dick Represents Municipally Owned or Operated Electric Utilities Stephen Dillard Represents Oil Producers Sen. Jay Emler Senate President Appointee Rep. Carl Holmes Speaker of the House Appointee Jeff Kennedy Represents Natural Gas Producers Gregory Krissek Represents Energy Production issues relating to Agriculture Janis Lee Senate Minority Leader Appointee Stuart S. Lowry Represents Rural Electric Cooperatives Galen B. Menard Represents Petroleum Refiners Gene L. Merry, Coffey Co. Commissioner Represents Kansas Association of Counties Deb Miller Secretary of Transportation Brian J. Moline, Kansas Corporation Commission Chair Richard G. Nelson, KSU Represents Renewable Energy Resources Adrian J. Polansky Secretary of Agriculture Mark Schreiber, Western Resources Represents Investor-owned Electric Utilities Rep. Tom Sloan Speaker of the House Appointee Bruce Snead, KSU Represents Energy Efficiency and Conservation Specialist David R. Springe, Consumer Counsel Citizens' Utility Ratepayer Board (CURB) Rep. Josh Svaty House Minority Leader Appointee Sen. Mark Taddiken Senate President Appointee Michael J. Volker, Midwest Energy Represents Energy Economist of State Educational Institution Steve Weatherford, President Kansas Development Finance Authority (KDFA) Curt Wright Represents Petroleum Marketers 4 Policy Recommendations 2007 Energy Conservation Reducing demand for energy through conservation and efficiency improvements is an essential component of a comprehensive, long-range strategy to meet the state’s future energy needs. Nationally, consumption of electricity is on the rise. According to the North American Electric Reliability Council (NERC), U.S. demand for electricity is expected to increase 20 percent from 2006 to 2015. Demand for electricity in July and August of 2006 reached record levels. In Kansas, electric utility customers used 37,022,066 megawatt hours in 2004, the most recent year for which there is data. The state’s demand for electricity is predicted to climb by about 2.5 percent annually over the next 10 years. In response to this projected increase in demand, many of the state’s utilities have plans to build additional coal-fired power plants. Policy Recommendations 2007 Energy Conservation On the natural gas side, the statewide demand has declined in recent years in response to higher prices. In 2003, the state’s consumption of natural gas was 281,346,000 Mcf, a 7.8 percent decrease from 2002 levels, and demand is expected to decline by about 2.0 percent annually through 2009. All Kansans may benefit from reducing the demand for energy through energy conservation efforts. Reduced demand puts downward pressure on all energy-related prices and defers such energy-related costs as investment in new power plants and extraction equipment. It also reduces health and environmental costs related to the energy-related emission of pollutants and greenhouse gases. And, finally, energy conservation by individual ratepayers can provide them with lower monthly utility bills. 5 Policy Recommendations 2007 Energy Conservation GOAL: Facilitate cost-effective energy conservation in the public, residential, commercial, and industrial sectors. A. Recommendations to the Legislature Establish statewide utility-operated energy education and conservation promotion programs. As a first step towards increasing energy conservation in the state, the state’s electric utilities would be required to provide all of their customers with information about energy conservation opportunities and options, including information on energy-related services that are locally available. Policy Recommendations 2007 Energy Conservation GOAL: Facilitate cost-effective energy conservation in the public, residential, commercial, and industrial sectors. B. Recommendations to the Legislature Amend Existing Laws Relating to Energy Efficiency Disclosure on New Homes To ensure Kansas homebuyers receive timely, useful information about the energy performance of new homes, K.S.A. 66-1227 and K.S.A. 66-1228 need to be amended in several significant ways. 6 Policy Recommendations 2007 Energy Conservation Policy and Program Recommendations Requiring Administrative Action 1. Encourage Local Units of Government to Adopt Minimum Energy Efficiency Standards for New Construction The Kansas Energy Office (KEO) should conduct a statewide survey of local county and municipal ordinances to ascertain the current status of energy efficiency codes and code enforcement. If the KEO deems it is necessary, based on the results of the survey, then it would develop workshops and offer training on energy efficiency codes and practices. The KEO would also work with a task force, consisting of representatives of local government and homebuilders, to develop model energy efficiency codes. Policy Recommendations 2007 Energy Conservation Policy and Program Recommendations Requiring Administrative Action 2. Encourage Utility Implementation of PAYS® (Pay As You Save) and PAYS-type Pilot Programs Kansas utilities are encouraged to implement pilot programs to demonstrate the effectiveness of financing energy conservation improvements through a PAYS® and PAYS-type financing system. The Pay-As-You-Save, or PAYS®, system is designed to give building owners and tenants a way to finance the purchase and installation of energy conservation measures with no upfront expense or direct debt obligation. 7 Policy Recommendations 2007 Wind Energy Developing low-emission energy-generation technologies is an essential component of a comprehensive, long-range strategy to meet the state’s future energy needs. Kansas has abundant wind-energy resources. Along with North Dakota and Texas, Kansas is ranked as having the best potential nationwide for the development of wind-generated electricity. Policy Recommendations 2007 Wind Energy Currently Kansas has 364 MW of installed wind capacity, and based solely on its wind resource, the State could generate much more wind-based electricity. Many point to the vast development potential in the western part of the state; however, significant transmission upgrades and investment would be required to accommodate large-scale wind development in western Kansas. In addition to being abundant and renewable, wind has the advantage of being clean—that is, wind-based electricity produces no emissions of regulated pollutants (such as SO2, NOx, or mercury) or currently unregulated carbon dioxide (CO2). 8 Policy Recommendations 2007 Wind Energy In addition to being abundant and renewable, wind has the advantage of being clean – that is, wind-based electricity produces no emissions of regulated pollutants (such as SO2, NOx, or mercury) or currently unregulated carbon dioxide (CO2). In a January 21, 2005, letter to Kansas Corporation Commission, Governor Kathleen Sebelius articulated her goal of developing the state’s wind resource: “As part of my goals to promote wind energy development in appropriate areas of the state, I believe it is appropriate to establish a vision for Kansas. I am challenging our electric industry to have 1,000 megawatts (MW) of renewable energy capacity installed in Kansas by 2015.” Policy Recommendations 2007 Wind Energy A KCC benefit cost analysis shows that additional wind-generated electricity in Kansas is likely to be more expensive than electricity from the state’s existing power plants, in spite of substantial federal and state incentives available for wind development (see list of existing policies below). Although the price of wind-generated electricity from the Gray County Wind Farm and Elk River Wind Farm was competitive for Aquila and Empire, utilities that relied more heavily on gas-fired generation, most utilities primarily rely on relatively inexpensive coal-fired and nuclear generation, and, thus, the cost of wind-generated electricity tends not to be as competitive in most situations. However, the benefit cost analysis also shows that if the advantages the State derives from increasing its reliance on clean energy sources (e.g., reduction in health-related costs associated with airborne emissions) are factored into the equation, then wind is cost-effective in many instances. 9 Policy Recommendations 2007 Wind Energy GOAL: Develop 1,000 MW of wind-powered generation in Kansas by 2015. A. Recommendations to the Legislature and Administration The Governor and the Legislature shall determine if and how State- and consumer-funded support should be structured to stimulate wind-energy development. Description The Legislature is encouraged to investigate the need for additional incentives (e.g., State tax credits, KDFA financing) to stimulate the development of the State’s wind energy resource, and, if deemed necessary, to approve such incentives. . Policy Recommendations 2007 Wind Energy GOAL: Develop 1,000 MW of wind-powered generation in Kansas by 2015. B. Recommendations to the Kansas Corporation Commission The Kansas Corporation Commission should consider the advantages associated with wind-generated electricity when evaluating applications or requests to approve decisions by jurisdictional utilities to invest in new generation or enter purchase power agreements for wind. As part of this broader consideration, the KCC will require utilities to demonstrate that competitive bids were solicited and the most responsible selection was made for the purchased power or investment. 10 Policy Recommendations 2007 IGCC Coal Power Plants, in Association with Carbon Dioxide Capture and Storage B. Recommendations to the Kansas Corporation Commission The Kansas Corporation Commission should consider the advantages associated with of IGCC coal power plants, combined with carbon capture and sequestration, when evaluating applications or requests to approve decisions by jurisdictional utilities to invest in new generation or enter purchase power agreements for IGCC coal power plants. As part of this broader consideration, the KCC will require utilities to demonstrate that competitive bids were solicited and the most responsible selection was made for the purchased power or investment. Policy Recommendations 2007 IGCC Coal Power Plants, in Association with Carbon Dioxide Capture and Storage GOAL: Increase opportunities to generate electricity through integrated gasification combined cycle (IGCC) coal power plants, in association with carbon dioxide capture and storage capabilities. A. Recommendations to the Legislature & Administration The Governor and the Legislature shall determine if and how State- and consumer-funded support should be structure to stimulate IGCC coal power plants, in association with carbon dioxide capture and storage. 11 Policy Recommendations 2007 Energy Use in the Transportation Sector GOALS: Reduce the number of vehicle miles traveled (VMT). Encourage the efficient use of vehicles. A. Recommendations to the Administration 1. Conduct statewide planning conference on VMT reduction 2. Develop plan for increased park and ride facilities 3. Include energy efficiency information in driver education 4. Develop strategy to reduce truck idling Policy Recommendations 2007 Energy Use in the Agricultural Sector GOALS: Reduce fuel consumption and increase carbon sequestration by encouraging farms to adopt no-till cultivation practices. Energy costs made up about 23% of U.S. crop production expenses from 2000 to 2003, compared with just 6% for livestock production. However, livestock operations experience higher energy costs indirectly through higher feed costs, which make up about 60% of all production costs. In Kansas, rising energy prices have hit Kansas irrigated crop producers especially hard. Based on 2002 data, the most recent available, direct energy consumption by the U.S. agricultural sector comprised only 1.1% of the nation’s total energy consumption. Thus, reducing energy use in agricultural activities will have minimal impact on overall energy consumption in Kansas, even though about 94% of the state’s land is used for agricultural production and wildlife habitat. 12 Policy Recommendations 2007 Energy Use in the Agricultural Sector GOALS: Reduce fuel consumption and increase carbon sequestration by encouraging farms to adopt no-till cultivation practices. A. Recommendations to the Administration Encourage greater adoption of no-till agriculture through the expansion of the existing WRAPS program. In 2004, the state initiated a watershed-based management strategy, the Kansas Watershed Restoration and Protection Strategy (WRAPS). WRAPS integrates existing conservation programs and practices based on watershed plans. 13 14 15 16 17 Alternative/Renewable Energy BioFuels (E-85 & Biodiesel) Wind Solar Hybrid Electric Vehicles Fuel Cells GeoThermal 18 Ethanol Overview • The U.S. Ethanol industry is now the fastest growing energy industry in the world • Ethanol is blended in 30% of the nation's gasoline • Annual record of 2.81 billion gallons produced in 2003 Ethanol Overview • Farmer-owned ethanol plants account for 40% of total industry capacity • Ethanol use consumed more than 1 billion bushels of corn in 2003 19 BioDiesel Overview • Alternative fuel for any diesel engine • From renewable resources - such as soybeans • Used in pure form (B100) or blended with petroleum diesel at any level • Made in the USA • Available in 50 states BioDiesel Overview • Alternative fuel for any diesel engine • From renewable resources - such as soybeans • Used in pure form (B100) or blended with petroleum diesel at any level • Made in the USA • Available in 50 states 20 21 Wind Energy Small (≤10 kW) • Homes • Farms • Remote Application Intermediate (10-250 kW) • Village Power • Hybrid Systems • Distributed Power Large (660 kW - 2+MW) • Central Station Wind Farms • Distributed Power • Community Wind Spearville Wind Energy Facility 22 23 United States – Current Installed Wind Power Capacity (Megawatts) December 2006 Community Wind A Community Wind project can be described as commercial wind energy project that can have power distributed locally or sold as part of a power purchase agreement and features local ownership; the majority of owners/investors are members of the community, and they have a financial stake in the project coupled with a commitment to see direct and positive local economic impacts. 24 Community Wind Tool Kit The Kansas Community Wind Tool Kit was developed by Joe King, Coriolis, for the Kansas Energy Office and the Kansas Department of Commerce with funding from the U.S. Department of Energy’s Wind Powering America program. It is also available online at: http://www.kcc.state.ks.us/energy/ State & Federal Incentives Wind or other renewable generation of electricity – Kansas Property Tax Exemption on equipment that generates electricity from renewables Wind – Federal Production Tax Credit (PTC) until Dec. 31, 2008 Ethanol & BioDiesel – Federal Volumetric Ethanol Excise Tax Credit, also known as VEETC, is a Federal tax credit that went into effect on January 1, 2005 - a credit of $.51 for every gallon of pure ethanol blended into gasoline State 7.5 cents per gallon producer payment for new or expanded production capped at 15 million gallons and available to the plant for seven years; $4.5 million cap entire program; sunsets July 1, 2011 State Biodiesel Production Incentive of 30 cents for each gallon of biodiesel fuel sold by the producer 25 State Incentives Ethanol Production Incentive $0.05 per gallon producer payment for existing producers for 3 years that ended of 6/30/04. $0.075 per gallon producer payment for new or expanded production capped at 15 million gallons and available to the plant for seven years; $3.5 million cap entire program; sunsets July 1, 2011. However, Governor Sebelius increased the amount of the incentive fund by $1 million in a April 17 governor’s budget amendment. Biodiesel Production Incentive $.30 for each gallon of biodiesel fuel sold by the producer. Cellulosic Ethanol Tax Credit An income tax credit, beginning with the 2006 tax year, for investments in new construction or expansion of an existing entity; Kansas Development Financing Authority (KDFA) financing assistance for projects provided with tax incentives under the bill. ….information provided by Kansas Department of Commerce State Incentives Machinery & Equipment Property Tax Exemption Exempts certain commercial and industrial, railroad, and telecommunications machinery and equipment acquired by qualified purchase or lease. Agricultural Value Added Loan Loans for feasibility, business plans or equity drives: up to $130,000 Community Development Block Grant The local unit of government may apply for infrastucture funding on behalf of a private for-profit biofuel entity. Funds may be used for water, sewer, road, or a rail spur. The maximum amount of funding is $35,000 per created job up to a ceiling of $750,000. At least 51% of the jobs must meet HUD’s low-and-moderate income (LMI) test for the county in which the project is located. This program requires that half the funds be paid back over a 10-year period at a 2% rate. This payment stream is accomplished through a special assessment placed on the property. ….information provided by Kansas Department of Commerce 26 State Incentives Enterprise Zone Incentives Investment tax credit of $1,000 per $100,000 of qualified investment -- 1% (i.e., 60,000,000 x 1% = $600,000 credit against Kansas income tax liability. Credits can be carried forward until used.) Jobs tax credit of $2,500 for every net new job created (i.e., 40 x $2,500 = $100,000 credit against Kansas income tax liability). Exemption from Kansas sales tax on all tangible personal property or services purchased for the construction of the facility. Qualifying M&E purchases are also exempt (i.e., $30,000,000 of qualified purchases at 6% sales tax rate; $30,000,000 x 6% = $1,800,000 savings). ….information provided by Kansas Department of Commerce State Incentives Workforce Training Funds Funds in the range of $300-$500 per employee. Other 2005 legislation to remove the mandatory labeling requirement for E10 ethanol resulted in a 700 percent-plus increase in Kansas E10 sales. 2006 legislation reduced the tax on E85 ethanol by 17 cents per gallon; although not detailed in the law it is a percentage commensurate with the BTU content of E85. Bill does not take effect until December 2006. ….information provided by Kansas Department of Commerce 27 Thank you! Jim Ploger j.ploger@kcc.state.ks.us Kansas Energy Office Kansas Corporation Commission 1500 SW Arrowhead Road Topeka, KS 66604 www.kcc.state.ks.us/energy 785-271-3170 28