Energy & the Environment
Q&A with AEP CEO Michael Morris
Business First of Columbus - by Jeff Bell
With a long history of churning out electricity from coal-fired power plants, American Electric Power Company Inc. is typically viewed by environmentalists as the antithesis of a green energy business.But that’s not entirely accurate anymore. While the Columbus-based electric utility remains firmly committed to coal as its chief energy source, it also is embracing advanced energy technologies such as wind and solar power, energy efficiency efforts and a federal cap-and-trade proposal to curb greenhouse gas emissions from power plants and other big producers of carbon dioxide emissions.In Ohio, AEP has signed power purchase agreements for solar and wind energy in the past year and is seeking a supplier for biomass fuel. It also has launched a demonstration project for its GridSmart energy efficiency program in northeast Franklin County and western Licking County, which has $75 million in federal stimulus funding behind it.On the greenhouse gas front, AEP Chairman and CEO Michael Morris has become a national figure in the debate over how the U.S. should address carbon emissions. Under his leadership, AEP – unlike a number of big business groups – came out in support of the federal Waxman-Markey bill that proposes a cap-and-trade system to reduce carbon emissions.Morris also has been a cheerleader for AEP’s carbon sequestration pilot project at its coal-burning Mountaineer power plant along the Ohio River. Boosted by $334 million in federal funding in December, the project involves capturing and treating carbon dioxide emissions from the plant and then injecting them underground for permanent storage.Morris shared his views on those and other energy issues during a recent interview with Columbus Business First.
Business First: It wasn’t that long ago AEP was saying there wasn’t a lot of potential for wind and solar in Ohio because of the lack of wind and sunshine here. Now AEP Ohio has long-term contracts to buy wind and solar energy. Why the shift?
Morris: It’s pretty straightforward. It’s totally in response to Senate Bill 221 (passed by the Ohio legislature in 2008) that had a requirement to add wind and solar power to the overall portfolio of energy you get. It’s still difficult to develop wind and solar in Ohio, but people are doing it now. We’re encouraged by that and happy to go forward and comply with the laws.I also think it’s safe to say and everyone should be fully aware that (solar and wind) are still extremely expensive forms of electricity. Nonetheless, we’re complying with the requirement.
Q: You and AEP have received national attention for your support of a cap-and-trade system on greenhouse gas emissions. Would you sum up the reasons behind that?
A: We’re big believers that things can be done (on greenhouse gas emissions). This is a technology challenge. The technology is nascent but being developed. We’re also big believers in pushing that technology envelope forward and seeing to it that the technology is available to us.I must admit (the global climate treaty talks in December in) Copenhagen, where we had some hope the world would come to some conclusions, was a little disappointing. It looked a lot like the big, growing manufacturing economies, mostly China and India, tend to do nothing. All of the small countries of the world were simply interested in having funds transferred to them instead of addressing global warming. So I’m a little less sanguine about approaching global warming than I was.We’re proponents of the cap-and-trade bill because it saves our customers a tremendous amount of money. In the Waxman-Markey bill, our carbon footprint is 150 million tons per year. Waxman-Markey gave us free credits for 110 million of those tons. To put a price on it, if you put (the credits) at $10 per ton, it saves our customers $1.1 billion. If you put $20 on it, it saves customers $2.2 billion.
Q: What kind of reaction has AEP’s stand on cap-and-trade received from Wall Street?
A: Wall Street is beginning to understand that carbon for companies like AEP and other coal-centric utilities is not the end of world but in fact an opportunity to put additional capital to work to make certain you have the most cost-effective power plants continuing to run.
Q: Considering the politics in Washington, are there any signs of getting something done on a cap-and-trade bill in the next couple months?
A: Going back to the disappointing results of Copenhagen, I had high hopes of the world coalescing (on climate change). Then we could come back and flesh out the House bill in the Senate and have something the United States could be very proud of. In taking off the rose-colored glasses, Copenhagen was a massive failure. I doubt the Senate has any intention to pick up the ball and run with it.
Q: Why is AEP is so committed to carbon sequestration?
A: Without that technology, you would shut down half of the power plants in the United States, which shuts down the U.S. economy three times over what we saw in 2009 (during the recession).
Q: What led you to be convinced that carbon sequestration has a lot of potential?
A: American Electric Power has been at this 104 years and been pushing the technology envelope forward for every one of those 104 years. This is another one of those areas where somebody had to step up and get this done. In a moment of Churchillian, I said to our team, “If not us, who? If not now, when?” We decided that’s exactly what we’re going to do.Our vendor, Alstom, the French firm, was convinced the chilled ammonia approach would work … The (chemical) equation always made sense scientifically. The real issue was to have the technology to separate all the other pollutants out of the flue gas stream, boost the chilled ammonia into the stream of mostly CO2, then remove the CO2 from that stream so what’s ultimately injected into the ground is basically 100 percent aqueous solution.We felt it all made sense, so let’s go forward and we did. I can’t tell you how pleased I am – it’s all working and working extremely well.
Q: What will carbon sequestration do to electric rates?
A: The way we look at it is that retrofitted carbon capture storage might go as far as doubling the (electric) generation rate. Let’s get this in a context that we’re generating power today at 4 cents (a kilowatt hour), and we will double that to 8 cents (with carbon sequestration). Let’s take that as a foundation, though I don’t think it will go that high. The comparative numbers are solar is north of 20 cents a kilowatt hour, wind is north of 15 cents and nuclear is north of 10 cents. So a retrofitted (carbon sequestration) unit at 8 cents a kilowatt hour will be very competitive going forward.
Q: What is your view of AEP’s GridSmart pilot project in Central Ohio?
A: That is equally exciting. What we don’t know is how interested our customers are in employing energy efficient technology in the way they use our product… With the technology we’re putting out in the marketplace, you will have a running tally of what (electricity) you use … and you could program your dishwasher to never run at any price point above 7 cents a kilowatt hour – or pick a number.So it enables our residential and small commercial customers to select how much energy they want to use and select when they want to use it. Most of our big customers have gone long ago to energy efficiency.
Q: Are you confident GridSmart will be expanded to other states served by AEP?
A: It should. What I worry about – and this is a very honest worry – is this: I have a BlackBerry and I’m relatively good at it, but I can do about 30 percent of what the BlackBerry can do. It has more talent than I know how to use. The concern with GridSmart is that it puts relatively sophisticated equipment in the marketplace and the average customer doesn’t take advantage of it. So regulators, like the Public Utilities Commission (of Ohio), Office of the Consumers’ Counsel and others would say, “Customers are not taking advantage of this, so let’s not spend any more money on it.” My hope is customers see this as a meaningful tool.
Q: Talk about some of the “green things” in your personal life. Do you recycle at home or drive a hybrid?
A: I drive a multiple-fuel car with pretty high percentages of ethanol. I absolutely recycle and try to use less energy – I try to do as I say to do – turning off lights and turning off things that don’t need to be on. I admit I’m one for sitting around in a sweater in the winter and not always taking full enjoyment of air conditioning (in the summer) – although I admit not as much as I could do on that.
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