What's a poor, environmentally-conscious utility to do? Here’s what.
“America’s not buying it,” says Ralph Izzo, head of PSEG, parent corporation of New Jersey’s largest utility. “People go to the light bulb rack, see the compact fluorescent bulbs announcing that switching to these saves you $30 a year, per bulb, and still they reach for the incandescents.” Part of it, Izzo feels, is that people simply don’t believe the package claims. But the greater, underlying reason effects both consumers and business decisions alike: it’s our passion for short-term-only profits.
Major and small business owners in this cash-precious era constantly tell PSE&G executives that they don’t want to invest in any clean energy program unless it pays back in three months. “What investment have you ever made that pays back in three months?” Izzo responds incredulously.
On November 5, The Rothman Entrepreneurial Institute invited Ralph Izzo to speak at its CEO Innovation Lecture Series. Mr. Izzo is currently CEO, Chairman, and President of the Public Service Enterprise Group (PSEG) and previously served as President and CEO of that firm’s major subsidiary, Public Service Electric and Gas, (PSE&G.) His talk, “Innovation, the Future of Energy,” detailed the major directions his company and all utilities must take to keep the lights on, and to stave off global warming. His concerns were not what one expected to hear from the head of a utility.
“Amidst the Great Wall Street meltdown, we were facing an even greater, more disastrous meltdown that scarcely made the news,” notes Izzo. As global warming forces unprecedented temperatures, ice sheets the size of Alaska have recently dissolved into the sea. These were sheets once thought to be permanent.
With virtually every creditable scientific report claiming humankind’s hand in global climate change, utilities come in for more than their share. 32 percent of our nation’s greenhouse gases result from electric generation, while only 28 percent comes from transportation (the most blamed culprit.) Industry produces another 19 percent, agriculture brings in seven, and residential dwellings cause six percent. Hypothetically, Izzo pointed out, if we were all to use no fossil fuels in any of our methods of transportation and at the same time ban any device using electric power, we still would not meet Governor Corzine’s goal of 80 percent emissions reduction below 2006 levels by 2050.
However, Izzo and PSEG have embraced the first part of the Governor’s Executive Order 54, which calls for a 20 percent reduction in electric use, 20 percent of our energy coming from clean renewable sources, and greenhouse gases reduced to their pre-1990 levels, all in 12 short years by 2020.
CEO Izzo and his family breathe the same air as the rest of us in the Garden State. He sees climate change’s threat of pollution, mass extinction of species, and geographic disaster. But as a power provider he has yet another, equally practical reason for leading the charge against climate change.
“We are no longer buying energy on the backs of our children, but on the backs of our grandchildren,” he says. Currently PSEG’s 2,600 square-mile diagonal swath of service from Gloucester to Bergen County, provides for 2.1 million electric and 1.7 million gas customers. It cannot go on this way. PSE&G cannot offer nearly three quarters of New Jerseyians reliable electricity depending on the traditional sources of gas and fossil fuels.
Thus to help feed the need and meet state mandates, PSEG has developed a three-point program of efficiency, renewables installation, and new technologies to lessen our carbon footprint.
* Efficiency. PSEG is targeting an overall drop in state energy growth rate from the current 1.5 percent annually, down to 1.1 percent, through customer efficiency. “Just as we cannot drill our way into energy salvation, we cannot achieve it by efficiency alone either,” notes Izzo. “However, without efficiency, we will never meet our goals.”
Efficiency is the low hanging fruit of greenhouse gas reduction. But as Izzo noted, individuals and businesses are still reluctant. “Give me $10,000 to rehaul your heating and electric systems and in ten years you’ll thank me,” finds few takers in this credit crunch. So for businesses PSEG is establishing not only electric efficiency evaluations, but loans to finance the required improvements. These range from upgrades on heat and electrical equipment, transferring from gas to oil, and purchasing renewable resources, such as solar.
“Our aim with such financing is to shift a tax payment, to an energy payment for consumers. By our paying or financing one customer to go clean, his bill goes down a lot, at the expense of the general customer base, whose bills will rise a fraction of a percent over time.” He adds that these loan programs are openly available. By leveraging the Board of Public utilities to capitalize such conservation investments, an estimated half of our carbon reduction goals can be met. It is a fiscal balancing act that keeps us both green and empowered.
In addition to preaching efficiency to customers, PSEG is keeping its own house in order, gradually turning its truck fleet into hybrids, and spending $3 billion to upgrade old generators. The latter investment saves an estimated 845,000 tons of greenhouse gas emissions.
* Renewables. This year, the Board of Public Utilities is poised to commit $100 million in financing for solar photovoltaic installation. Thanks to both government and utility efforts, New Jersey has been the state leader in solar investment paybacks. And it’s paying off. From these loans will come 30 clean megawatts - half the Order 54 solar photovoltaic goals for 2009.
“Neither is wind to be denied,” says Izzo. “While it would take an impossible 13,000 offshore wind turbines to handle the state’s entire electric needs, this intermittent resource can add substantially to our clean energy arsenal.” He cites the 96-tower wind farm which PSEG is launching jointly with the Garden State Offshore Energy Corporation that will hopefully reach its 350 megawatt capacity by 2013. PSEG also has also taken limited positions in biomass generator stations, which it sees as a minor, but reliable clean energy contributor.
Definitely the most controversial clean energy resource which Izzo and his firm are counting on is nuclear. When PSEG’s Salem nuclear plant launched in 1977, its entire staff consisted of seven men and one watch dog. In his leaner days, actor Bruce Willis served as one of its security guards. “The technology and security measures have changed time out of mind, and we feel at this point we are able to confidently produce more nuclear energy and depend on this source increasingly,” says Izzo. While the annual CO2 reductions from efficiency by 2020 might reach 4.75 million tons, and another .32 million tons from solar, one new nuclear plant would save 8.2 million tons of greenhouse gases.
* New Technologies. What you cannot totally eliminate through efficiency and new renewable sources, you might just be able to capture in a bag and place it where it will do no harm. That is the theory behind clean central station power. The C02 released from fossil-fuel generated power is experimentally being captured and released into underground saline caverns whose limestone absorbs the gas and holds it purportedly forever. “Can I promise that the storage definitely lasts forever?” quips Izzo, “ Not really. After all, such time periods are a little hard to test.”
Recently, PSE&G bought one form of compressed air energy storage technology in hopes of responding to peak demands. Off-peak electrical power during the “shoulder seasons” of spring and fall, at night is used to compress air in underground air storage vessels. Then at peak times the air can be released to drive a turbine to answer the high demand hours.
Even with all the PSEG and conscience consumer efforts, Izzo insists that the clean energy revolution requires the strong hand of government. “We need a national cap on greenhouse gas emissions, a national implementation plan,” he states.” and we need a variety of trade mechanisms to achieve these reductions.” Hopefully our new national leaders will see the wisdom and necessity of Mr. Izzo’s proposals. Biz4
Ralph Izzo knows whereof he speaks when it comes to the deep technical issues regarding our energy needs. He obtained his Bachelor’s, Master’s and PhD in physics from Columbia University, as well as additional nuclear reactor technology studies at M.I.T. He then rounded out his business education with an MBA from Rutgers University. Working as a research scientist at the Princeton Plasma Physics laboratory, Izzo performed numerical simulations of fusion energy experiments. Since 1992, Izzo has served PSEG in a variety of capacities, first as Vice President of Appliance Service, Vice President of Corporate Planning, and in 2006 he was elected as President and CEO of Public Service Electric and Gas Company. Currently Izzo serves as Chairman, President and CEO of PSE&G’s parent company, Public Service Enterprise Group, Inc.