1. Energy Markets and Energy Policy in Tennessee
Matthew N. Murray, Director
Howard H. Baker Jr. Center for Public Policy
September 2015
Presentation to
State Energy Policy
Taskforce
September 17, 2015

2. General Assembly’s Mandate
“…to perform a study on the economic feasibility of creating and utilizing a statewide comprehensive energy plan. The study shall examine the state’s current and future energy supply and demand needs, existing energy policies, and emerging energy challenges and opportunities.”
Howard Baker Jr. Center for Public Policy
4/8/2019

3. Baker Center’s Report
Intended as a foundation for policy by providing detail on TN’s energy sector, broadly defined
The ever-changing environment within which TN’s markets operate
TN reacts to rather than sets market outcomes
Markets and technologies are changing rapidly
Big picture of energy flows in TN
Sankey diagram for TN (see next page)
Electricity generation
State’s natural resource base for power generation and potentially export
Environmental and health considerations
Howard Baker Jr. Center for Public Policy
4/8/2019

4. Sankey Diagram for Tennessee: Energy Sources and Uses
Howard Baker Jr. Center for Public Policy
4/8/2019

5. Baker Center Report (cont.)
Identification of external influences that are beyond the control of policymakers in TN, including market considerations, technological developments and policy factors
Federal policy, including laws and regulatory policy
TVA’s presence limits what the state can achieve from the perspective of electricity generation, distribution and retailing
Markets will generally drive energy market outcomes, including supplies and prices
Pace of technological change is potentially disruptive and raises concerns regarding investment—past, present and future
Broad areas of policy influence and policy levers
Howard Baker Jr. Center for Public Policy
4/8/2019

6. Purposes of a State Energy Plan
Pursue agreed upon goals that will improve the wellbeing of Tennesseans
Coordinate engagement of stakeholder groups
Coordinate state policy across agencies and provide umbrella and framework for local government action
Provide some degree of certainty and direction on policy to support informed private sector decisionmaking and investment
Affect energy market outcomes that might otherwise evolve with little or no government influence
Howard Baker Jr. Center for Public Policy
4/8/2019

7. Development and Implementation Should Be Built Around Formal Goals
Candidate goals (see NASEO reports)
Sustainability
Economic development and competitiveness
Renewable portfolio standards (a means, not an end)
Energy efficiency and conservation
System resiliency and security
Price stability and affordability
The state should establish its own goals based on informed stakeholder interaction
Howard Baker Jr. Center for Public Policy
4/8/2019

8. Some Key Findings State’s role circumscribed by TVA as noted above
More energy is wasted in TN than is consumed
Petroleum is the largest energy source for the state, with most consumed in the transportation sector
Coal production has a dismal outlook given low natural gas prices and global concerns over public health consequences of coal use; fewer than 400 workers are employed by the industry in TN today
The state has limited reserves of fossil fuels aside from coal
Residential energy usage ranks second to Alabama among bordering states
Additional opportunities for solar and biofuels development in TN
Fossil fuels are a major source of energy-related pollution
Howard Baker Jr. Center for Public Policy
4/8/2019

9. State Policy
Policy must drill down from the 60,000 foot view of the report to highly-specific policy goals and initiatives
Rural economic development and diversification
Further development of biomass and solar assets in TN
Economic impacts are likely modest and regional in nature
Promote energy conservation and efficiency improvements, freeing up purchasing power to drive the state economy
Benefits of traditional programs accrue disproportionately to higher income households but still help with efficiency/conservation
Develop policies that can provide benefits to lower income households, including renters
Weatherization programs have been shown to improve health outcomes and wellbeing
Generally reduce pollution and promote public health
Howard Baker Jr. Center for Public Policy
4/8/2019

10. State Policy (cont.)
“Positioning the State as a Leader in the U.S and World Energy Markets”
Include strategic industries in state targeted recruitment group, potentially including R&D firms and firms producing energy related-inputs/technologies and energy efficient products
Incentive programs for targeted industries
Build around existing strengths (UT, ORNL, auto manufacturers, small modular reactors) rather than try to create something from nothing
Institutions versus technologies
System benefit charges as a mechanism to fund efficiency, conservation, economic development and other gains that accrue broadly to Tennesseans
Uses of funds should be carefully determined before such a fund is put in place
Howard Baker Jr. Center for Public Policy
4/8/2019

11. A Few Basic Policy Issues to Keep In Mind
Policy should be able to pass a cost-benefit test to ensure accountability in the use of state resources
Recognize TN’s limited resources and balance noble goals like reducing global greenhouse emissions against policies that offer greater assurance of direct benefits to TN businesses and households
Regional ozone and particulate matter
Stakeholders and policymakers must stay informed in a rapidly changing policy environment
Annual Energy Outlook for Tennessee to provide timely information to policymakers and stakeholders
A statewide champion and coordinator for state energy policy?
Howard Baker Jr. Center for Public Policy
4/8/2019