High hopes, hoopla as DOE digs in on quadrennial review

Source: Hannah Northey, E&E reporter • Posted: Monday, February 3, 2014

President Obama has made a sweeping, high-level assessment of the nation’s energy infrastructure a cornerstone of his climate plan.

The launch earlier this month of his Quadrennial Energy Review (QER) was greeted enthusiastically by energy industry executives, regulators, lobbyists and policy wonks who see it as the Department of Energy’s version of the Quadrennial Defense Review, a legislatively mandated analysis of Department of Defense strategies and priorities.

Can the DOE review live up to the hype?

“The DOE is, frankly, such a relatively small part of America’s energy picture as a whole that I don’t know that this can be much more than a nice little exercise,” said Andrew Holland, a senior fellow at the American Security Project and a former Senate energy aide to Defense Secretary Chuck Hagel. “DOD is the only one that has authority over defense; what they say is going to happen in four years. If the DOE says we want to go in this direction for energy, it doesn’t mean a lot unless private sector, Congress and everything go along with it.”

Obama signed a memo directing a task force of federal officials to prepare the four-year policy review as part of the broad climate plan he announced in June. White House Office of Science and Technology Policy Director John Holdren and climate adviser Dan Utech are leading the effort to complete the report by the year’s end.

“Its not a bad exercise to do, but I don’t think it’s a game-changing sort of thing,” Holland said.

Republican energy lobbyist and strategist Mike McKenna was more critical. “Not only will this thing be a colossal waste of time, it may be the largest waste of time in a city known for epic wastes of time,” he said. “Not because it has to be. Run by different people, it could be a tremendously valuable exercise in examining what role the federal government plays in impeding the production, delivery and use of energy.”

A top DOE official recently acknowledged some of the review’s limitations.

“The government does not own the assets that we’re talking about — the Department of Energy does not control the assets that we’re talking about,” Melanie Kenderdine, head of DOE’s Office of Energy Policy and Systems Analysis and a senior adviser to Secretary Ernest Moniz, said at a Washington, D.C., event.

She added, “We don’t control the regulations, and so whatever recommendations ultimately come out of this will probably be a lot more incentive-focused than compulsion-focused or budget-focused.”

But there are optimists who say the initiative is poised to be much, much more.

Elgie Holstein, DOE chief of staff during the Clinton administration, said any comparison between the DOE and DOD reviews is misleading. Holstein, senior director for strategic planning for the Environmental Defense Fund, said the review will provide a critical, multiperspective view from the many agencies that have a hand in U.S. energy. The review will also “bring about and reflect” a greater focus on analysis and policy than DOE has had in years, he said.

“I think it’s easy to get carried away with the comparison and [finding] fault with the QER, but I don’t think that’s fair or useful,” Holstein said. “The QER has its own unique benefits to the nation, policymakers and the industry.”

Charles Ebinger, director of the Energy Security Initiative at the Brookings Institution, agreed. “A lot of our energy policies go back to an era when we were looking at energy scarcity, and we really haven’t had a quadrennial energy review since the whole perception of not only the U.S. but the North American oil and gas market has changed,” he said.

Kenderdine also rejected any comparison between the DOE and Pentagon reviews.

“This document is not a strategy document that will track to DOE’s budget by and large, so it’s a very, very different animal than what you see with the other agencies, which are inward-focused,” she said. “This is externally focused and, I think, it’s the most difficult thing to do.”

For now, it’s far from clear what will be included.

‘Nuclear is … a very weird beast’

R. Skip Horvath, president and CEO of the Natural Gas Supply Association, said there’s a risk the QER could turn into another “national energy strategy” — something the industry has seen many times before.

Narrowing the scope of what issues to tackle will be critical to its success, Horvath added.

“The criticism is well-taken that the DOE doesn’t have an easy role, but I would say if the DOE were not to do this kind of thing, no one else would,” Horvath said.

The key, he said, is Moniz, who has extensive Washington experience.

“If anybody can do it,” Horvath said, “I think this secretary can.”

Sources say DOE has teed up ideas for focusing the review, but the interagency process has yet to begin. The department is also reaching out to stakeholders. Moniz, for example, is set to brief the National Association of Regulatory Utility Commissioners on the review at the group’s winter meeting next month.

DOE has said the first installment of the review is slated to focus on decades-old infrastructure for transmitting, storing and delivering energy, including a look at the 200,000 miles of high-voltage transmission lines, 2.2 million miles of local distribution circuits on the grid, 300,000 miles of transmission pipelines, and hundreds of natural gas processing plants and underground storage facilities.

But Kenderdine said nuclear waste and infrastructure for storing and shipping carbon dioxide from power plants may not be included.

“Nuclear is a tough one. … It’s a very weird beast, and we are fighting — not fighting, we’re discussing — whether we put nuclear waste disposal here,” she said. “I would desperately like to not do nuclear waste disposal in this document, but we haven’t decided.”

Kenderdine said DOE is looking to the White House and the agency’s advisory board on whether to include nuclear waste and related infrastructure, adding that the question is one of workload, not politics. She noted that Obama assembled a Blue Ribbon Commission in his first term — a panel that includes Moniz — to find alternatives for storing spent reactor fuel.

Everett Redmond, the Nuclear Energy Institute’s senior director for policy development, said in an email that the industry wasn’t anxious about nuclear waste being left out of the report but was more perturbed that power generation in general wasn’t included.

“The Nuclear Energy Institute was surprised to hear that the QER will not address electricity generation in this first effort,” Redmond said. “Recent weather-related challenges have demonstrated a need to address generation as well as transmission and distribution infrastructure.”

Kenderdine in her speech pointed to myriad challenges the review could explore, noting that more than half the country’s gas transmission and gathering pipelines were constructed in the 1940s, ’50s and ’60s, and that supply and demand are shifting, triggering reverse flow on some pipelines.

She also pointed to an aging workforce — more than 60 percent of workers in the electric and gas utility sector are likely to retire or leave in a decade — and the system is being challenged by severe weather, including the polar vortex that plunged the East Coast into a deep freeze this month and triggered price spikes for natural gas and electricity.

Moniz has decided “we need to really make a candid assessment with the unconventional oil and gas revolution … on what priority we should push for various projects, to see if we can get any expedited through the regulatory process,” Ebinger said.

‘Plans are nothing, planning is everything’ 

Moniz has repeatedly said the review will have a heavy focus on the lack of pipelines and related infrastructure to transport oil and natural gas from relatively new U.S. shale deposits (E&ENews PM, Oct. 24, 2013).

One issue DOE will likely examine, Kenderdine said, is a new development wherein shale plays are cropping up in what used to be energy-demand areas.

“If you reverse those pipelines, we can probably put a lot more supply into areas where gas is needed now,” Ebinger said. He pointed to pipeline infrastructure that was built up to accommodate imports from the Gulf Coast but was later thrown into question as oil resources surfaced in the Bakken Shale play and Canada, sending oil toward the Gulf.

“The same is true at a lot of our gas pipelines from domestic production in Texas, Louisiana, Oklahoma,” Kenderdine said. “We’re geared to move gas from producing regions up into the Midwest. By reversing flow of the pipeline, we can have much greater flexibility on where the natural [gas] goes.”

Donald Santa, president and CEO of the Interstate Natural Gas Association of America, said the role of the QER may be to “shine a light” on what steps can be taken to bolster energy infrastructure while recognizing that DOE and the federal government cannot compel results. “It’s recognized that when it comes to energy at the federal level and across the state level, the authority to compel or influence results is very diffused, very decentralized,” Santa said. “The role of the QER may be more to shine a light on things that can accomplish results.”

Carl Zichella, director for the Natural Resources Defense Council’s Western transmission, was recently appointed to the DOE Electricity Advisory Committee to work on the review, a panel of about 30 people that includes utility executives; former and current regulators; and representatives of consulting firms, independent energy producers and merchant transmission companies. FERC acting Chairwoman Cheryl LaFleur is the agency’s liaison to the committee.

“It’s the early days. We’re really getting started,” Zichella said. “The conversations have just started.”

The committee will be squarely focused on rapid and historic changes taking place on the U.S. electric grid, moves that are leading to more low-carbon, efficient resources, he said.

“We haven’t had a lot of trouble siting pipelines because of the authority vested in FERC. That’s not the case with transmission lines,” Zichella said. “We’re seeing changes in the industry we haven’t seen in many decades; this shift from base-load generation to a flexible grid with variable generation profiles, this is new.”

There’s a lot to consider on the electricity side, he said, including high-voltage and distribution power lines, ancillary services, and technology that fosters the integration of variable resources like wind and solar. Focus could also turn to distributed generation and the country’s tight supply of transformers, he said.

Zichella said the review could also include oil and gas transportation and aging of the system, pointing to the San Bruno, Calif., pipeline explosion in 2010 that killed eight people and damaged or destroyed more than 100 homes. The committee could also look at U.S. infrastructure to move coal by barge, rail and truck, as well as export terminals that have triggered debate in the Pacific Northwest, oil and petroleum production and storage, and uranium processing and nuclear waste disposal, he said.

Zichella rejected the notion the QER could be filed away and forgotten. He pointed to President Eisenhower’s famous quote that “plans are nothing, planning is everything.”

“We’re on the right trajectory, and it’s the right time to ask these questions about our infrastructure,” he said. “Planning helps you put your finger on some of the things you need to move the system forward.”