There is a tidal wave of government regulation regarding the production of energy on the horizon. Both the U.S. House and Senate are currently considering bills that would require substantial amounts of energy to be produced from renewable or cleaner sources. The two bills both enact a set of mandates that “cap” future carbon emission levels and allow utilities to “trade” emissions on the commodities market. I would be negligent to not point out how well using these same markets worked for the banking and mortgage industries.
This system of “cap and trade” regulations will change the way we do business in the U.S. and the Midwest. States that rely on the use of coal -- and have less than ideal conditions for the production of solar, water or wind energy -- will suffer. These states will be forced to either pay for more expensive/less productive technologies or will have to purchase credits from areas requiring fewer resources or producing more carbon-free energy. The end result, in either case, will be higher energy costs for Midwest manufacturing states including Wisconsin.
Unfortunately the real winners may not be the U.S. at all. Countries that ignore environmentally friendly policies and are able to supply lower cost energy will attract new manufacturing. Nike shoes and Apple Computers, manufactured abroad, would benefit — while New Balance and Dell, with North American facilities, would suffer. The debate has also become extremely partisan, which makes little sense to me because at the heart of the issue are domestic jobs and the U.S. economy. In the end we may actually create substantially more carbon emissions worldwide as our heavy manufacturing moves to countries with lower or nonexistent emission regulations.
Let me outline the dilemma as I see it. Assume the UW-Madison develops new technologies for an electric vehicle. A Wisconsin company licenses the technologies and develops a cost-effective prototype for a car with zero emissions. Plans for production begin and the company is forced to another region or overseas because of energy costs and government regulation. Can’t happen, you say -- I would point out that there are no televisions that are made in the U.S., most other consumer electronics are foreign, most cars are imports, most toys, clothes, and even much of our food is no longer domestically produced. I am a fan of the global market but the playing field has to be somewhat level for the game to be fair.
Now for the positive side of the energy dilemma. One Wisconsin firm has seen the tidal wave and decided to grab a surfboard and ride it in. I sat down with Scott Neitzel of Madison Gas and Electric and asked about the future of energy production in Wisconsin. Scott shared an MGE initiative, the Energy 2015 Plan, to create economic and environmentally responsible energy. The plan outlines that the company will discontinue burning coal at the downtown Madison Blount Generating Station by 2011, increase its use of wind tenfold, involve the customer in energy efficiency efforts, and secure a cleaner more reliable and affordable product across the board.
To date MGE has made good on the promise. The Blount facility will soon no longer rely on coal, MGE has increased its wind generation from 11 to 137 megawatts, and the company has incorporated new cleaner technologies into its generation facilities portfolio. In addition, MGE has educated the consumer and offers a Green Power Tomorrow program, which allows customers to voluntarily purchase renewable energy for a penny per kilowatt-hour and sell solar energy back to MGE for $0.25 per kilowatt-hour.
Neitzel suggests, “Renewable energy is a part of our corporate culture from the top down.” In describing how they got here he used a sports metaphor from Wayne Gretzky: “You skate to where the puck is going to be, not to where it is.”
The most interesting observation I can make is that MGE was not motivated by current policy or the looming cap and trade initiative. In fact the 2015 Plan was adopted in January of 2006, a full two years before the new administration or current legislative agendas. I learned a lot about balancing good business with good policy from Scott and MGE. I hope this lesson will be shared on Capitol Hill before legislation is drafted. We must remember that energy, the environment and good business is, like surfing, a balancing act. If we are really going to ride the wave to shore, we need to see it coming.
One more confession, I stole the whole surfing analogy from Scott. Sorry -- Cowabunga dude!
Ken Harwood writes an opinion column for the online Capital Region Business Journal, where this column first appeared.