About The Author:
ROGER FELDMAN, Co-Chair of Andrews Kurth LLP Climate Change and Carbon
Markets Group has practiced law related to the finance of environmental and
energy projects and companies for 40 years. In particular, he has analyzed
and executed a wide variety and substantial value of project financings. He
chairs the American Bar Association’s Committee on Carbon Trading and
Finance, serves on the Board of the American Council for Renewable Energy,
and has been a senior official in the Federal Energy Administration. He is
a graduate of Brown University, Yale Law School and Harvard Business School.
Secure Clean Giant
by Roger Feldman -- Bingham, Dana L.L.P.
(originally published by PMA OnLine
The Energy Act, in all of its confusion, glory and bounty of benefits, is
rolling towards what, at this moment, appears likely to be passage. Soon
thereafter, as the night the day, will be a deluge of analysis. Were the
right resources benefited? Were the right stimuli applied to consumer market
behavior? Were the environmental consequences sufficiently taken into
account? How in charge will FERC be now? But the most important question
will be: Will “merchant power” as we have come to know it, still be
standing? Will there be channels for vigorous competition in the power
What is needed for analysis is a different perspective: not that of
interconnecting generators but an integrated approach to the multiple
requirements of individual energy-consuming users, which takes environmental
and resource stability into account. “Merchants” who can provide this may
outsail the traditional energy galleons which are clearly reemerging. Since
national security is presumably the ultimate driver of the Energy Act (not
simply the cornucopia of benefits to certain suppliers, as non-faith-based
cynics have suggested), and since we live in the new age of anxiety, it is
only appropriate to examine how our military is approaching the question.
Next to China, it may be probably the biggest energy consumer in our world
(80 Trillion Btus; $800 MM per annum). What it wants is a good indication of
what a merchant should sell, since “the customer is always right.”
With this in mind, it is useful to analyze what the newly released “Army
Energy Strategy for Installations” (the “Strategy”, sir) has concluded it
should want. While somewhat optimistically surmising that technology will
conquer the surging energy demands of a global industrial nation, its
reluctant conclusion is that energy prices will increase. The first radical
conclusion – by conventional electric utility industry standards – is that
cost and population pressures point in the direction of more compact
installations with higher energy density and less expensive distribution.
The strategy’s conclusion, in turn, is that this implies not only to an
imperative for efficiency, but also a conclusion which in an earlier age
might have been found only in a Whole Earth Catalog.
Integration of energy and environmental sustainability, it deduces is
critical to the success of the Strategy. “Sustainability connects our
activities today to those of tomorrow with sound business, energy and
environmental practices. We will invest in sustainable and energy efficient
facilities” the Strategy assures us.
Its specifics come in five key principles, from which are extracted below
not the policy poetry, but some of the acknowledged hardware implications:
Installations will make extensive use of electric energy monitoring and
control equipment to validate performance of energy systems to focus
corrective action accordingly;
- Continued reduction of the use of electricity from non-renewable fuel;
- Regionalizing purchasing and entering into long-term contracts to achieve
- Shift and reduce electrical loads during peak hours to reduce total energy
Sustainable Development and Design (SDD) standards (green buildings to you
civilians) should be incorporated into all installation planning and
construction renovation projects.
The Army, more than its civilian counterparts, also seems to be very
sensitive to security issues affecting energy supply. It turns out that
“sudden impacts to the global market can adversely affect the ability to
meet mission requirements and sustain our quality of life.” The Strategy’s
suggested response – expand the diversity and availability of our energy
supply, improve the reliability of security to our power systems, and
increase efficiencies in building facilities. Along related lines, it turns
out according to the Strategy that it would be desirable for installations
to have the ability to counter potential disruption threats, including
failure of deteriorated and overburdened infrastructure (like transmission).
The use of distributed generation at mission critical facilities, and
partnering with utility and community suppliers, are recommended approaches.
Recognition of the relationship of energy production and water availability
and conservation also will receive specific attention.
Well, you may say, that is very well for the clean green giant, that
insecure Schreck, but what does it have to do with merchant power —
swashbuckling exploiter of the free market seas. Fount of trading innovation
and last bastion from market power.
My thought: everything! The days of rampant IPP deregulation are over. The
days of offering integrated energy-environment solutions for facilities are
upon us. The Strategy is, at least conceptually in the vanguard, of the new
mentality. It is one central station utilities are not yet set up to serve
well, and whose regulatory framework is not designed to save it.
So just as small mammals are reputed to have scurried among the dinosaur
eggs, so too the new merchants must find their niches for survival in a
world soon to be, without PUHCA or PURPA. Each merchant developer, an army
of one, defining customer needs and working toward aggregation and creation
of mass markets. Where the merchant sail: follow the buoys set by the secure
clean green giant.
ROGER FELDMAN, Co-Chair of Andrews
Kurth LLP Climate Change and Carbon Markets Group has practiced law related
to the finance of environmental and energy projects and companies for 40
years. In particular, he has analyzed and executed a wide variety and
substantial value of project financings. He chairs the American Bar
Association’s Committee on Carbon Trading and Finance, serves on the Board
of the American Council for Renewable Energy, and has been a senior official
in the Federal Energy Administration. He is a graduate of Brown University,
Yale Law School and Harvard Business School.