Power Plays: What’s Ahead for US Energy

John W. Rowe is Chairman Emeritus of Chicago-based Exelon Corporation, an electric utility serving Chicago, Philadelphia and Baltimore. Rowe led Exelon from its formation in 2000 through the completion of its acquisition of Constellation Energy in 2012. Rowe previously held chief executive officer positions at the New England Electric System and Central Maine Power Company, served as general counsel of Consolidated Rail Corporation, and was a partner in the law firm of Isham, Lincoln, & Beale. Rowe is the past chairman of the Nuclear Energy Institute and the Edison Electric Institute. He was co-chairman of the National Commission on Energy Policy and served on the Secretary of Energy’s Blue Ribbon Commission on America’s Nuclear Future.

What do you think the future looks like for nuclear power generation in this country, given both the events at Fukushima and the decreasing cost of electricity brought on by cheap natural gas? What do you think is the future of nuclear waste management strategies?

We will get a lot of mileage out of the existing nuclear fleet, and except for the two that Southern is building, we will not see any new ones built for more than twenty years. The barriers are the two that you mentioned. The first and the largest one is the economics. The second one is that the events at Fukushima remind you that no matter how good you make it, there always remains some infinitesimal possibility of a series of natural events that overwhelm your design. That will create some continued public discomfort for a long time, and it’s a proper factor. I suppose a third barrier is that we still have not made any real progress in getting a spent fuel disposal site.

Storage is going to be more local for a very long time and that is the wrong solution. The Yucca Mountain would be a fine solution, and there are other fine solutions, but the politics and public relations issues of getting it done are so large that we will continue to store fuel at the reactor sites for a long time.

Given the low domestic prices for natural gas and high prices abroad, do you think liquefied natural gas (LNG) exporting terminals are worth the cost of upfront investment? What effects do you think this will have on the domestic market? Do you have any environmental concerns about natural gas extraction?

Yes. Economically, exporting LNG is profoundly wise. There are also political issues involved in doing it. So, I think it will happen slowly not quickly. Of course I have environmental concerns, but they are not overwhelming. We can have a national set of standards for shale gas fracking that gives us a very high level of protection at a very low level of cost increase for the commodity itself.

During the State of the Union address, President Obama used ambiguous language when referring to “market-based approaches” to addressing climate change. How do you think the federal government should address climate change? 

A carbon tax. It is the most market-based approach. A cap and trade is the second most market-based approach.

But, first, I do not think it is going to happen, although I strongly believe that it should. Second, I believe that we are seeing a distinct phase-out of coal-fired generation due to gas prices anyway. A cap-and-trade or carbon tax would somewhat accelerate that. Third, all approaches other than those two do more harm and less good. I’m fairly unequivocal on that subject.

What effect do you think effective storage could have on the future of the grid and power generation?

Huge. An economical and effective storage mechanism, meaning one with somewhat less environmental issues than pumped storage and higher efficiency, would radically improve the economics of wind and solar, radically increase the potential for blends of wind, gas, and solar that create a much cleaner energy supply. However, in my opinion, that Nirvana is fairly far away. Everyone wants it, we can build batteries at microwatts, centiwatts or even watts, but batteries that really work in tens let alone hundreds or thousands of megawatts are rare.

Do you agree with experts who argue that dynamic pricing, which allows consumers to purchase power at wholesale prices, could reduce peak demand and promote efficient power generation?

Dynamic pricing is a good idea but not the Holy Grail some people think it is. But, I’m all for it.

What do you think are some of the shortfalls of dynamic pricing? Do you think it could change a residential consumer’s behavior?

Not that I think there are problems, it is just that in all the states that have competition we effectively have dynamic pricing.  Any large customer or any representative of a group of small customers can already do a dynamic pricing contract. You can go to any major supplier and you can cut a contract that’s based on usage at different times of day and so forth. However, electricity costs are rarely a large enough part of the customer budget that they cause the major change in behavior that the dynamic pricing advocates would have you believe. There is nothing wrong with dynamic pricing, and I do not see a problem with it. It is just that people propose it as if it was the Holy Grail. Holy Grails are rare and precious. In other words: not found.

I don’t think there would be much change at the residential level. But it is also astonishing at the very large customer level. But, in very, very many cases there are other constraints that are so much larger that keep the customer from shifting too much load. I am not saying it doesn’t happen. It does happen, it’s real, it’s significant, but it is not as overwhelming and huge as some people would have you think.

You fund two Charter Schools here in Chicago. Why do you think your involvement is so important? What are some of the benefits of this type of school?

They are huge. This is the largest commitment of money and time that my wife and I make to civic things, and we make a great many commitments of both money and time. Just to illustrate the extent of our commitment, we have put or committed eight million dollars to two charter schools. My wife tutors every week and I spend probably a day every other week. For us this is a massive commitment. And why do we do it? First, because you have more committed principals, more committed teachers, better results measurements, and kids who sign up for better structure and discipline. Second, the results are already better on average – ten percent better. Our high school is four blocks from a traditional public school, and our average ACT scores are 19.6, four points higher than the other school’s. There is a huge difference in terms of college capability. Our graduation rates are higher, and our college placement rates are infinitely higher. The third reason for doing it is: The kids are worth it. Jeanne and I spend a lot of time with kids; I wish I could say we know all thousand at the two schools, but we obviously can’t. She probably knows 50 or 60 pretty well, I probably know 20 or 30 pretty well. They’re nice kids, they’re interesting kids, they’re rewarding to know, and they teach as well as learn from you. As teenagers they come with their share of frustrations, and it’s remarkable how well how many of them are surmounting their problems. This is a true passion for us. Real-time pricing is an interest, charter schools are a passion.

Feature Photo: cc/Dulcimer61