Interview: Michael Polsky

Abstract

Even with the election of a renewable-friendly president and interest in clean energy booming, wind power entrepreneur Michael Polsky worries that a U.S. energy policy that encourages renewables is still a long way off.

Eight years ago when Michael Polsky started Chicago-based Invenergy, now one of the largest wind power companies in the country, windmills generated less than 5,000 megawatts of U.S. electricity. But Polsky, a longtime energy entrepreneur with degrees in engineering and business, saw an opportunity. His instincts were dead-on. Since then, interest in wind power has blossomed. The evidence: Last year, U.S. windmills generated 25,000 megawatts of electricity and more than 8,500 megawatts of wind turbine-fueled power was created. Even oil-rich Texas has caught wind fever; it now has the most wind farms of any state in the nation. Meanwhile, ambitious plans are underway to increase wind power's share of electricity generation from 1 percent to 20 percent by 2030. Better still, President Barack Obama was elected on a platform supporting a green energy revolution, billions of federal dollars have been earmarked for renewables, and it seems everyone is talking about the need to reduce carbon emissions.

Yet, Polsky is worried. With vicious political infighting coloring every issue in Washington (e.g., financial bailouts, health-care reform, the wars in Iraq and Afghanistan), he believes it will be difficult to secure what he and his industry desperately needs–a federally mandated renewable electricity standard that ensures a portion of U.S. electricity is generated from renewable energy sources. As for international climate agreements, such as a follow-on climate treaty to the Kyoto Protocol, he's less concerned with the intricacies of cap-and-trade than in instituting measures that encourage real growth in wind and other renewables. After all, he is a businessman first and foremost, and without these national and international mandates, companies such as Invenergy will continue to lurch from project to project, unable to plan for the future.

BAS: How close are we to a coherent U.S. energy policy?

POLSKY: To be honest, I'm not that optimistic. I would put the chances for any energy policy at 50/50, and the chances for a coherent energy policy at less than 50/50. With all the different interest groups vying in Washington, there's a better chance for us to tackle certain issues one at a time, whether it's curbing automobile emissions first or mandating that utilities buy a certain percentage of their electricity from renewable energy sources. But it might be impossible to do them together.

BAS: How does not having a national energy strategy affect your business?

POLSKY: It affects everyone in the energy business. For some, the effect is beneficial. I'm thinking here of the coal and oil industries. Business-as-usual is good for them. But those of us in the renewables business are affected negatively because without a national policy, we can't plan and deploy capital on a long-term basis. In other words, we work on a project here and a project there, without really ever knowing what's going to happen next year. Sadly, that's how most of the renewables industry operates–project to project–rather than on the basis of a long-term plan. And unless we have a national policy, we will always operate project to project. Especially now, because of low natural gas prices, it becomes that much more difficult to operate without a national policy. Plus, the financial crisis has reduced demand for electricity, making matters harder still.

BAS: Do you support the American Clean Energy and Security Act of 2009, a wide-ranging proposal that would, among other things, establish efficiency and renewable energy standards for utilities and create a cap-and-trade market for carbon emissions in the United States?

POLSKY: Not really. It's better than nothing I guess, but it isn't a big step forward. The bill has serious weaknesses, the most serious of which is that it would distribute for free a large amount of carbon-emission allowances, so that industries that emit carbon dioxide will be allowed to continue to do so without paying for it. I just don't see how that will lead to an appropriate price for carbon and, thus, help achieve meaningful emission reductions. Also, the renewable electricity standard in the bill is weak. In fact, we've already met the bill's standard requirements for 2012. So why do we need a bill for something we've already achieved?

BAS: Washington has pledged a lot of money for renewables through subsidies. Can that offset weak legislation?

POLSKY: Quite honestly, if Washington provides a strong policy, the private marketplace can take care of the financing. Now, money has been allocated to renewables as part of the stimulus bill, but that money dealt with credit and financing issues for projects that already had been proposed. So we still need federal legislation calling for and/or mandating the deployment of renewable energy on a large scale, because what we have at the moment doesn't do anything to encourage new projects. A strong federally mandated policy also would create a sustainable, nationwide market for renewable electricity. Today, such markets exist only on a sporadic, state-by-state basis.

“I believe deployment of renewable energy is the best way to reduce carbon emissions, even better than cap-and-trade or a carbon tax.”

BAS: What is the situation at the state level?

POLSKY: Twenty-nine states currently have some sort of renewable electricity standard that requires utilities that sell electricity in that state to generate a certain amount via renewables. But the standard varies widely from state to state. In California, for example, Gov. Arnold Schwarzenegger just signed an executive order that requires one-third of the state's electricity to come from renewables by 2030–the most ambitious standard of any U.S. state. Other states have much weaker standards–a mere 1 or 2 percent of their electricity generation must come from renewables–and 11 states don't have any standard at all.

I believe that in order for us to deploy meaningful amounts of renewable energy, we need a national renewable electricity standard, not just state-by-state regulation. States can certainly supplement that standard or enlarge it–a la California–but some basic national requirement must be set by the federal government.

BAS: It appears that many wind projects are approved, but they can't be constructed because they aren't able to plug in to the grid.

POLSKY: That's called interconnection. And yes, because the grid hasn't been meaningfully expanded in the last decade or so, a lot of projects are awaiting grid improvements or updates before they connect to it. But in my opinion, this isn't a major impediment. The bigger impediment really is the lack of markets for electricity from these projects; at present, there are more projects waiting for markets than there are projects waiting for interconnection.

BAS: When it comes to renewable energy plans that rely on wind, one of the better known ones was promoted by Texas oilman T. Boone Pickens. Yet, he's faded from view. Why wasn't his plan adopted?

POLSKY: He did a lot to raise awareness, but he underestimated how difficult it is to get things done in this country, even if an idea makes a lot of sense. Also, some parts of his proposal made more sense than others, and his credibility might have suffered from those parts that didn't make as much sense, such as his push to use natural gas to fuel vehicles. In fact, that was something that really hurt him–some people thought that because he was a big natural gas guy, he had ulterior motives to boost certain parts of his plan. Additionally, he thought that his money and connections could overcome a lot of problems that many of us have been experiencing in this sector for years. He found out, though, that it's a lot more difficult than it looks, even with a big wallet and influential friends.

BAS: Negotiations for a follow-on climate treaty to the Kyoto Protocol will be taking place in Copenhagen in December. What should the treaty include, and what would you like to see discussed there?

POLSKY: First of all, I believe deployment of renewable energy is the best way to reduce carbon emissions, even better than cap-and-trade or a carbon tax. I believe this for the following reason: For every kilowatt-hour of electricity produced from wind or solar, it displaces a kilowatt-hour of electricity produced from fossil fuel burning power plants. So in a way, it's a one-to-one reduction. If we had 10, 15, or 20 percent renewables in the United States, we would reduce carbon emissions dramatically without the need for cap-and-trade or a carbon tax.

As for Copenhagen, if we commit to, or support, some sort of reduction in carbon emissions, renewable energy will be an integral part of that policy, because even with cap-and-trade we still have to reduce emissions substantially–not just trade them. And the way to reduce emissions is to deploy renewable energy on a much larger scale. Simply put, the future of my industry depends on how carbon emissions will be reduced. So that makes Copenhagen very important.

BAS: Do you have any particular requirements for an international agreement?

POLSKY: My main requirement is to reduce carbon emissions as much as possible as fast as possible, because the faster we reduce them, the faster Earth will benefit.

BAS: When you say that more wind farms would displace kilowatt-hours from carbon-emitting power plants, how does the intermittency of wind and the need for backup power figure into that?

POLSKY: The intermittency of wind or solar has been overblown. In the United States, between wind and solar, we now have about 1 percent of the country's total electricity generation, meaning the time to worry about intermittency becoming a problem is far, far off in the future. Even if we have up to 20 percent intermittent resources in the system one day, we still will need enough backup resources to deal with intermittency.

Obviously, we have to adapt and adjust the operation of our electrical grid to account for the resources we're feeding it. But that's just a technical issue, it's not a showstopper. In fact, the fix is rather easy: If there is more intermittency in the grid, the rest of the grid and the rest of the power plants connected to it need to be prepared to deal with these shortfalls. At Invenergy, we're aware of this fact. That's why we also own natural gas plants and are looking into solar. To make sure we have enough power, all of them are going to have to be part of the mix.

“Policy is important everywhere, whether it's in China or in India. In the end, the countries with stronger policies will have more renewable energy and better deployment of that renewable energy than those countries with weaker policies. It really is that simple.”

BAS: What's your stance on nuclear energy?

POLSKY: It's part of the mix, too. Today, about 20 percent of the energy in this country is produced by nuclear reactors, so it will continue to play a role. Whether new nuclear plants will be built here, I don't know. They certainly won't be built in the next 15-20 years. There are three main problems with nuclear energy as I see it: (1) it's very expensive; (2) plants take an extremely long time to build; and (3) it comes with a lot of uncertainty. These are difficult challenges to overcome.

BAS: Do you view nuclear energy as competition?

POLSKY: Let me answer that question in this way: By the time the first new 1,000-megawatt nuclear plant could be built, we could deploy 100,000-150,000 megawatts of renewable energy. We're talking about totally different deployment times.

BAS: Internationally, are there any countries that you look to as models for renewable energy adoption?

POLSKY: The United States is really behind on the policy side of things. For instance, Europe has an electricity tariff system that mandates payment for electricity generated by renewables and promotes technologies such as wind power. China recently has proposed that 15 percent of its electricity will be generated by wind in 2020. If Beijing sticks to that policy, it will be able to deploy renewable energy much more quickly than we will be able to–absent a national policy, of course. India just recently announced its own initiative to add 6,000 megawatts of wind turbines by 2012.

The lesson from all of this is elementary: Policy is important everywhere, whether it's in China or in India; frankly, large-scale deployment of renewables is severely limited without one. And in the end, the countries with stronger policies will have more renewable energy and better deployment of that renewable energy than those countries with weaker policies. It really is that simple.

BAS: Are renewables enough to offset climate change?

POLSKY: Not by themselves. Obviously, we also will need to deal with emissions outside of the electricity sector, such as auto emissions. And when we talk about the transportation sector, we have to decide if we're going to significantly electrify transportation and if we're going to deploy more public transit or not.

BAS: Talk about the NIMBY aspect of wind power. How have you seen the reaction change over the last few years?

POLSKY: NIMBY issues always are going to be part of the equation because people don't like development close to where they live. Am I concerned? Yes. But you can't prevent people from expressing their opinions about what they want to live nearby and what they don't want to live nearby.

Over time, we've found that a lot of people may have a NIMBY-type reaction at first, but when they learn more about our projects or about what we're trying to accomplish, they change their minds. With wind farms in particular, it seems that while people might not like them at the inception or siting phase, they grow to like them once they've been built. In fact, I've talked to a lot of people with homes overlooking windmills who think they're beautiful.

BAS: What do you think renewable energy will look like in 50 years?

POLSKY: By the year 2060, I truly feel that one-third of the energy in the United States will come from renewables. We can't afford to have it any other way. The way we're going with global warming, our current dependency on oil and natural gas–something has to give. We don't have any other option.