Energy

Paul Soglin: "I drool, looking at various industrial sites, thinking, 'If we could just put a biodigester next to that manufacturer, and then capture all of that lost heat that we normally see in the agricultural setting ...' [But] it costs money."

Clean Energy Roundtable

February 1, 2010

This discussion is not a rehash of the pending Cap-and-Trade legislation to regulate carbon emissions, though there is reference to it. Rather, the topic is renewable energy — the market for it, our ability here in Wisconsin to be a Midwestern player, and the cost of it. Who will (or should) bear the upfront cost of refitting factories? If it takes an energy company the same amount of jumping through hoops to bring a digester online as a nuclear power plant, what is the market incentive to do it? It is only by bringing experts together at one table, to build on the comments offered by their colleagues, that IB can offer readers such candid roundtables with spirited conversation and insights. You will not be disappointed.

Our Expert Panel
Tim Laughlin, Owner, Wave Wind, LLC
Wave Wind, LLC is a leading wind energy service provider based in Sun Prairie, Wis. It supports the planning, development, and maintenance of small- to mid-sized wind farms, and provides a full range of wind project services — from project planning and material handling to wind turbine construction and maintenance.

Paul Soglin, Partner, Energies Direct, LLC
The former Madison mayor now is involved in environmental and infrastructure-related projects. Energies Direct offers specialized engineering, including: general advisory services; feasibility studies and economical analysis; detailed and approved engineering; operation and training support; and documentation.

Gregory A. Bollom, Assistant VP, Energy Planning, MGE
Madison Gas and Electric (MGE) generates and distributes electricity to 137,000 customers in Dane County, and purchases and distributes natural gas to 141,000 customers in seven south-central and western Wisconsin counties. MGE's roots in the Madison area date back more than 150 years.

Keith Reopelle, Program Director, Clean Wisconsin
Advocates for Wisconsin's clean water/air; holds state politicians, polluters, and regulatory agencies accountable; educates state residents, media, and government policy makers; and forges stronger alignment across environmental advocacy groups and philanthropists. Also, Reopelle sits on the Governor's Global Warming Task Force.

Todd Stuart, Executive Director, Wisc. Industrial Energy Group
The Wisconsin Industrial Energy Group, Inc. (WIEG) is a non-profit association of large energy consumers that advocates for policies that drive affordable, efficient, and reliable energy. Since the early 1970s, WIEG has been a strong voice for Wisconsin ratepayers and an engine for business retention and expansion.

 

The Discussion
Do we want clean energy industries built in Wisconsin?

Moderator Jody Glynn Patrick [IB]: Is Wisconsin encouraging clean energy industries to locate and prosper here?

LAUGHLIN: There's a huge resource of industrial-based manufacturing along the Great Lakes area — specifically, Manitowoc, Sheboygan — that's an untapped resource. It's a dead zone for the state of Wisconsin, meaning they were there. We had large shipbuilders with the infrastructure to manufacture tower sections. We have Tower Tech here in the state of Wisconsin. I think with the growth, they'll end up moving out of their facility — it's a little tight right now. But we have the ability to manufacture and move equipment around, through the Great Lakes chain and through the Interstate infrastructure that we [already] have here right off of these ports.

We are working with some manufacturers to try to encourage them, to at least spark some interest to go down that road. We see a lot of the manufacturers opening up shop in the Denver area, the Iowa area. There was some hint of manufacturing five, six years ago, through folks like Gamesa, but I think we're missing an opportunity here when it comes to what we have for infrastructure already along the Great Lakes.

BOLLOM: I agree. Wisconsin is strategically in a good position, with so much opportunity around us — particularly all of the wind development in the upper Midwest. And we have a huge manufacturing base that is really underutilized right now. That is a challenge for us, as a state. And I think key for Wisconsin will be finding a way to create the incentives for businesses to want to restart or reshape their business to take advantage of some of these clean technologies here, as opposed to Ohio, Illinois, or somewhere else.

SOGLIN: Venture capital is a big part of it. That's the main issue we are encountering. It's not just how you fit in as an investor in the renewable energy or clean energy marketplace, but if somebody's making a $5-, $10-, or $100-million investment, that has to be compared to all of the other possible investments out there, and the risk and rewards. We're not mature at this point where we're able to attract those investments. That's always been a problem in Wisconsin.

REOPELLE: On the infrastructure point, there was actually a really robust analysis done a couple years back by a group in DC. It's called the Renewable Energy Policy Project. They looked at where the investment and the jobs would go if you made a relatively massive investment in four technologies — wind, solar, biomass, and geothermal. This is on a national level — we're talking about something a little more than what is currently in the federal Clean Energy bills, okay? Something in a similar scale as to what's in the Clean Energy Jobs Act. [They concluded that] based on where current manufacturing infrastructure is, or was at that time, eight of the top 10 states, to Greg's point, are in the Midwest.

Wisconsin actually ranked number eight. They looked at how many dollars would flow into these states and how many jobs would be created; for Wisconsin, for example, over 12,000 manufacturing jobs would be created in just component manufacturing. That's saying nothing of the construction, the developers, the maintenance, and all that. So, to Tim's point, we definitely have an infrastructure here that's underutilized.

Theory Versus Practicality Issues
STUART: I'd like to counter some of that. I represent some of the state's biggest manufacturers, the most energy-intensive ones — paper mills and foundries and businesses like that. What I hear most is [the need to] just improve the state's business climate. We have been just hammered over the last few years with job losses. Wind and solar panels — it's great that a lot of this manufacturing is happening here, but it can be produced anywhere in the world. China is doing it; they don't necessarily have the Cap-and-Trade in China to do this and they are doing it at a lower cost than we are.

I'll give you a couple of real-world examples: We've had factories shut down in this state because they have the highest energy costs in their fleet. Of all their factories, Wisconsin was in the highest or was the highest. So we have to be careful that we don't kill the goose that laid the golden egg. We have some of the highest electric rates in the Midwest, and if we're not careful, we can drive them even higher.

REOPELLE: I agree with a number of your points, Todd, and a number of factors have to come together. I think one of them is creating the market. I met someone from the University working with a solar developer in California who went to school at UW-Madison; he wants to come back here and open up a plant. His only hesitation is, is there going to be enough of a market here?

And it's very interesting. For solar, a lot of the applications are more expensive. So you have a state like Illinois that just passed two pieces of legislation over the last couple sessions with a fairly robust renewable energy portfolio standard, with a very significant solar [component]. And that's definitely going to create a market in Illinois. So he's sort of weighing those things right now.

I know another entrepreneur who's opening a solar panel module manufacturing facility in the Menomonee Valley in Milwaukee this June, and he's very supportive of increasing the renewable energy standard. But as we know, a lot of that will go to wind. So it takes a lot of different policies and upfront capital, as Paul says. A lot of factors have to come together I think.

Separating Out the Many Issues
SOGLIN: We're going to have to separate out questions of the business climate, which we can control here in the state of Wisconsin, and issues of how manufacturing particularly does, relative to what's happening nationally — for which we've got very limited control.

When decisions are made by investors, by companies, as to where to locate, they look at a number of factors. Consider a study done in New York City in the early 1970s — there's a lesson here. They looked at the 25 largest companies that had exited New York and moved into the suburbs. In general, they concluded that in most instances, the CEO of the company had moved into a suburban [home] location two to three years before the company then followed. Why did the CEO go? For better schools, safer neighborhoods, a cleaner environment, those kinds of factors. Obviously, cost of operating the business was part of it.

But there's a number of things we've got going for us in this state that we shouldn't lose sight of: We are Wisconsin.

Towering Competition
LAUGHLIN: When we put together a pro forma on a development, one of the large factors is the transportation of components, especially in the wind industry. Everything's a "super load," a permitted load. We're getting components from India, China, Canada, from all different directions. And it's a huge puzzle to put together on a project because you might have the base come from India and the mid-section come from Canada. There's a lot of quality control issues there.

Locating somebody here, like a Tower Tech, with the ability to manufacture only creates a better performa for folks to develop wind projects and help negotiate purchase power agreements with the utilities. Then transportation cost is a number that makes it work. So there's a huge opportunity.

When I was with Vestas, we wanted to help create and market a more competitive product; we looked at opening up manufacturing facilities near a location with a proposed amount of megawatts for the wind industry. We're still beating our heads against this issue.

[For] MGE, Alliant, and other folks that have wind farms here, it's a logistical issue to manage a thousand components coming in from the Port of Houston. It's a costly issue — transfer from a European market from an Asian market through the Port of Houston, and then customs, and then transloading a train. I mean, it's crazy. If you threw all the numbers together on a paper, you'd find out real quick that it makes complete sense to do something here. And why not in Wisconsin?

SOGLIN: One of the big issues is the cost of transmission, along with the question of research. Let me just throw out two examples.

One, going back to the research question, let's take ethanol. I'm very skeptical about the future of ethanol from a number of standpoints, not the least of which is if you've got 40 acres going into corn and producing ethanol from it, maybe you're more efficient putting those 40 acres into switchgrass and using it as a biofuel. Point being that a lot of people invested a lot of money in ethanol. If we're going to continue to encourage that kind of experimentation, which includes failures, there has to be recognition of that — some form of subsidization.

The second thing is that usually we think in terms of large power plants. That's the way I was raised — we're going to build a nuclear plant or this or that. But the wind farms have given us more insight as to what happens when we start dispersing our sources of energy.

Look at biodigesters, most of which are on farms where, at best, you capture about 42% of the potential energy. I drool, looking at various industrial sites, thinking "if we could just put a biodigester next to that manufacturer, and then capture all of that lost heat that we normally see in the agricultural setting ..." So that's the kind of stuff we have to play with, and experiment with, and it costs money.

A state policy: What do we need?
IB: Todd, how can we help the biggest users of energy — manufacturers — engage in cleaner technologies? Subsidies or mandates?

STUART: I represent a wide variety of large customers. Many of the paper mills have on-site resources, whether it be hydro or biomass opportunities, it's all over the board. But you have many others — say a foundry — lacking a huge opportunity to use green energy and are actually adverse to it if it raises their rates.

We need to look where it makes sense. Most the people I represent would just take lower rates, period. And if we could figure out, if the market can drive this on its own — and a lot of these things are happening because there is a global market.

One of the things we caution is be very careful what you do at the state level. If we're not careful, we could end up penalizing with state-only policies, because corporations compete against their own factories in other parts of the country and in the world. They're competing against their sister organizations, not just other companies.

There are opportunities here, and we've done some sensible steps with the incremental laws over the last few years. But we don't want to kill the goose that laid the golden egg: manufacturing. It's about 20% of the economy, $49 billion or so in the state's economy. We have to be very careful what we do at the state level, because there's a much bigger picture out there.

BOLLOM: This question of subsidies is a big issue, because right now, today, most of the cleaner technologies are more expensive from a pure economic standpoint. They raise the cost of providing electric service to customers. Wind is more expensive; we put in a biodigester, it's more expensive; solar's more expensive. That's fine, up to a point that customers are willing to pay for that.

The challenge, if we want to create the jobs that everyone promises will come with this, is that we have to determine how to collect that subsidy from people so that we don't create a market that says, on the one hand, "Okay, we're going to have a certain percentage of our energy that comes from wind or solar or biodigesters or whatever" — which will clearly create a market that will drive some of the development Keith was talking about earlier — but we then have to balance that with, "Okay, there is going to be a higher cost that goes with the service we provide as a result of that."

Generally, when costs go up, the pressure on businesses increases, as Todd noted. That pressure can cause them to think, "Do I still do business in Wisconsin or do I move it somewhere else?" Even a residential homeowner, as the price of the electricity goes up, they have less disposable income to spend on something else. And that has an economic effect also.

There's a real struggle with balance when we get into these sort of competing needs. We want to create a market that potentially drives new job creation and changes the way we provide service to customers. But at the same time, you can't do it in a way that raises the cost of what is really a fundamental input for business to a level where you drive businesses to other states. That's the struggle for all the policy-makers — to figure out where the appropriate balance lies.

Real-World Costing Examples
SOGLIN: There's a number of specific examples of that which come to mind. First, depending whether you're looking for solar, biodigesters or wind, there may be an incremental cost in terms of the hookup to the nearest substation. Who is going to pay the $60,000 to $100,000 cost of required modifications not covered by energy grants available from either the federal or state government? And utility companies question why they should incur that cost because of just simply one user's needs.

Second example of it is the fact that, at least in the most rural areas, when we're looking at biodigesters, a lot of the farms have single phase. Single phase doesn't work with a biodigester when you hook up a cogen unit. Who is going to change that hookup for a couple of miles to that one farm? Utilities are saying, "Don't look at us." That can be a deal breaker.

And a third example is the hook-up, the administrative costs. A utility company representative told me that the required paperwork to bring a biodigester online is about the same as it would be for a nuclear power plant. It's a modest exaggeration, but the point is that the work that the utility has to do is significant for something that is producing relatively little power compared to everything else coming through the grid.

So those are some of the issues that in all the legislation, in all the planning, all the grant writing that's going on, were not considered years ago: the real-world problems of today.

BOLLOM: And I can follow, being the utility representative at this table, Paul is right. Up to a certain point, the environmental permitting, regulatory approvals, all of the initial work to get a power plant built and connected to the grid is the same — regardless of whether I'm putting in a very large power plant or a 20-megawatt biodigester, to a certain extent.

There are some issues that apply to the scale, but in terms of getting the permitting and operating and the interconnections and everything that goes with that, they're about the same. And we get a whole lot more energy out of a large power plant than from a small one.

There are some issues that are not scalable, and that works to the detriment of some fairly small projects. And that's just a fact of life that we have to deal with when we try to change the kind of the environment within which we operate.

Emerging Policy: Reversing 100 Years
STUART: I think Paul gave great real-world examples of things that we just haven't been anticipating until now. The regulatory model we've been using for a hundred years is an energy policy around keeping the lights on and affordability and reliability. Now there are a whole bunch of fights about who subsidizes what, and what is energy policy?

I'm seeing a lot more social policy creeping into what our energy policy is. If voters are comfortable with that, regulators, legislators ... but it's really fundamentally changing the way we've looked at energy for 100 years. The regulatory Public Service Commission was essentially founded here 100 years ago.

SOGLIN: I think your point is really a critical one, which is that we are dealing with 21st century issues which are far more complicated than the original issue, which is simply balancing the needs of utility investors and rate payers. And we're doing it on a really late 19th century model.

REOPELLE: To Greg's point about the costs, we are now coming up against many of the costs of the energy model we've been using for this long time — an essential station fossil fuel power generation. The big one right now is global warming. Yes, solar energy costs more than a coal-fired power plant, particularly if you aren't internalizing those costs of the impacts of the emissions. And, of course, that's how the world is changing.

And the world, literally, the planet, is making a transition to a clean energy economy because all the analyses done for the welfare of the human race. Even if you look at it from purely a cost perspective — the costs of dealing with the impacts of something like global warming, compared to the costs of reducing emissions and mitigating global warming — it will cost several times as much to deal with the impacts of global warming. When you factor in all those costs, the equation is very different, and that is the crux of the debates in Washington about a Cap-and-Trade program. etc.

The second point I want to make about cost, especially [in light of the] Governor's Clean Energy Jobs Act — which does not have a Cap-and-Trade proposal, does not directly regulate green house gas emissions, but does very significantly increase the renewable energy standard — this will cause a lot more renewable energy to be built in Wisconsin and neighboring states, and also recommends as much as doubling or tripling our investment in energy efficiency. It's very significant.

One important way to look at those costs, as Greg suggested, is to make sure we're making a big investment in efficiency and conservation at the same time we're making that investment in renewable energy.

The Governor's Global Warming Task Force, who made the recommendations embodied in this legislation, did a very rigorous modeling and analysis. What that analysis showed in terms of people's energy bills is that the combination — the package of clean energy policies that's being moved forward — will, particularly in the long run, actually result in lower energy bills. For residential, commercial, and industrial customers, anywhere from 5 to 15% reduction in those energy bills.

There's a big important difference between utility energy rates, how much you're paying per kilowatt-hour, and the amount of the bill you pay. But what they really care about is how much they're writing a check for.

The main point is we can't forget efficiency and conservation, because that is the lowest cost way to meet our energy demand.

Rate Spikes: What Can Larger Consumers Expect?
STUART: I've got to jump on some of that. Some of our members, especially in the eastern half of the state, have had rates go up in the last five, six years, go up 100%. And to have your rates go up 100%, but to say your bills are going to go down — I'm sorry, but that's just not going to happen unless you shut down your factory or produce a lot less.

Right now, we're facing billions in brand new power plants, we're paying billions in brand new transmission lines and billions to retrofit the power plants, billions for the 10% standard. That's before we get to anything like Cap-and-Trade, before we get to the Governor's Global Warming Task Force, before you get to a 25%, and before you get to the new energy efficiency proposals as well.

So we have billions upon billions upon billions pancaked into the system already that are just starting to come due. I don't think people realize that. And what can customers take? We are looking at double-digit increases soon. Rate shock. You can't avoid it. And so what is the tipping point for customers? We're going to find out soon.

The Public Service Commission basically is going to have to approve large increases, and they don't have much of a choice. When the Point Beach Nuclear Power credits come off the WE Energy bills next year, they're going to have double-digit jumps for many customers, if not all. And if you thought folks were angry this year when their bills went up, just wait a year.

REOPELLE: That's a tremendous argument for investing in energy efficiency and conservation because that is by far the most effective way to bring bills down.

STUART: I love it when you talk about cost-effective policies.

BOLLOM: Let me come at this from maybe a slightly different perspective. We spent over a year doing Community Conversations, where we invited every one of our customers — residential and business — to participate in walking through an energy planning exercise.

If you ask most people where electricity comes from, the standard is "from the wall." We had to go through a long exercise to explain, that it moves from the power plant through the wire, I mean, we went through all of that.

Our Madison customers have, by and large, higher rates than most of the state, based on services those clients want. So we went through a planning exercise. They want more renewables, so we have more renewables in our mix. They like solar. They like wind. We walked through how the costs were going to change. Yeah, okay. Then there's a balance point. And to Keith's point, efficiency is certainly the cheapest thing we can do.

But in the short-term, as we transition from the way we've operated as an industry for a hundred years, and move to a different model, there is going to be some short-term pain because there is a cost involved. Until customers make a change ... I'm sure Todd will say many of his large industrial customers, as a matter of survival, have already implemented a significant amount of efficiency.

To move to a different model is going to be more expensive. When I look at a wind or digester project, I know my customers have said "We like that, but we'd like you to do it wherever it's the cheapest." So we have built a good chunk, or acquired most of our wind from out of state because it's about two or three cents a kilowatt-hour cheaper.

Our customers also said, "We'd really like it local, but we also want to make sure as many people can participate and can take advantage of the renewables as possible." So we tended to put much of our investment out of state, because that's where it's cheaper — as our customers have told us they want.

Wisconsin has some great strategic advantages just because of the manufacturing base we have — it can supply a lot of the industry to produce this new wave of technology. Wisconsin is not rich in its wind resource. It's just not. I can make a capital investment in Wisconsin or a capital investment in Iowa, and I get 30% to 40% more output for the same dollar I invest in another state as what I do here for wind. I'm not sure Wisconsin's ever going to be a great state for us to look at wind.

Who benefits in the state, and who pays?
SOGLIN: You know, you're getting to the essential question. It's who benefits and who pays. What you described is typical Madison. I remember 15, 18 years ago, when we had the ambulance fee. And in typical Madison fashion, people said, "I'd rather pay more knowing that everybody gets great ambulance service" without much thought given to who benefits, who pays.

When you say that Madisonians are willing to pay a little more for electricity, or for power, that's clean, that's green, I'm not surprised. But when you get to the "who benefits?" from that green policy, it may not necessarily be the people within your customer base. It could be physically areas elsewhere in the state or in Iowa or in Texas.

And that's part of the problem with the whole energy discussion: We can't just isolate the matter so that if people are willing to pay more for cleaner energy, those who pay are the ones who benefit. Long term, that's one of the issues that has to be addressed. In other words, people who are willing to do the right thing shouldn't be punished with higher expenses. I don't know the solution.

No, our energy source does not originate in the wall ...
LAUGHLIN: We start with educating the customer about costs. I've seen your Web site with its great literature and information. It paints the picture of how the transmission grid system works in the nation. But to bring it back down to "Here's the letter A, here's the letter B, and don't go to B until you understand A," is really what what we're trying to do.

Meanwhile I don't think we ever answered the first question asked of the roundtable today [so I'm going back to that question]. We purchased some turbines for a six-turbine project here this summer from Hyundai. And I was part of the whole Dane move from Denmark and Germany, when Vestas NEG Micon came over here. They tried to manage the whole construction from overseas, and the cultural differences were just complicated, and it was such a headache back in the late '90s to put up a single unit.

So the first thing that we did when creating a relationship with Hyundai was to say, "Hey, let's bring it back to basics. Let us teach you how we feel you should approach the U.S. market." We said, "Hyundai, we're going to set up a meeting with the Governor and a meeting up in Manitowoc with some different folks from the solar industry, from electrical contractors — a consortium of different people that we've pre-qualified as an A Team — to come together from the manufacturing base, from the vendor support base, with senators being part of this meeting."

We had a plan in place for them already, with a whirlwind tour. By the time they were done, they understood what we were trying to do. I think they were a little overwhelmed at first, but that's getting back to basics. We want them to be here in the state of Wisconsin. And now our business relationship has even expanded beyond that to open up some other opportunities for them, because we created that from the beginning.

For your customers, the same thing: Here's your outlet, and the power goes to the grid, and then it's coal and gas and wind, and it's all into the grid. We go from A to M, and we stop at M for five minutes, and then we go to Z a lot of times.

BOLLOM: Once people get a better understanding of both how energy is made and delivered, we also need to educate about the important role customers' decisions make with respect to how much and what type we use, how much it's ultimately going to cost. Then they'll be thinking differently, from a business perspective.

Electricity is an invisible good. You get a bill at the end of the month and you pay it. Most people don't think about every time they plug in a flat screen TV with a home entertainment system; things that use electricity.

I've had discussions with customers who say, "I put in insulation and put stuff over my windows, and my bill went up." Did you do anything else? Did you buy a new TV? "Well, I did X, Y, and Z," and I explain that every time you plug that into the wall, that offsets some of that good you did when you put in the insulation.

Education is key to encouraging both clean energy use and clean energy development.

SOGLIN: Just curious: In our households, we've got all these appliances that, even if turned off, are consuming energy because of those instant on features, things of that sort. In the industrial manufacturing world, do you have the same problem?

STUART: I think that's a great point because in the residential world, you may be doing things, but you may have a cooler in your basement for beer, a giant flat screen TV, or new lighting.

On the industrial side, the people who pay my bills are pretty darn sophisticated because they have a huge built-in incentive, global competition, to watch their energy costs. Energy costs are one of the top three costs — usually it's electricity, labor, and raw materials. They watch those three things, because they spend a million dollars a month on their electricity; it's a huge incentive to watch how much electricity they're using.

It gets back to who benefits, who pays, who subsidizes how much. These are terribly tricky things to figure out.

SOGLIN: Here's two things I know that have been done in modern office buildings. One is that zones are really isolated down to covering areas as few as 10 or 12 employees as opposed to whole wings of buildings. Secondly, you've got photosensitive switches so if people leave the room, there's no movement, the lights go off. Is this the stuff that Johnson Controls is doing?

Manufacturing: At the Apex of Regulation, Policy, and Cost
STUART: Most of my members are sophisticated users who have been doing a lot of this stuff for a long time. Johnson Controls, Orion Energy Systems, others — lighting is one of the big low-hanging fruits, one of the first things factories do because the payback is so fast.

For really large reductions, often you have to look at an internal process, a motor or a fan, a drive, paper machines running well or buy another one. Some of the big chunks you can get often take very large capital investments and they're not always done for energy purposes. It may be for the production capacity of the plant or it may be for safety. Safety is a huge thing. There are many other factors other than energy. It's really hard talking to regulators and others who may be just looking at the energy piece. A company is looking at economic survival or safety or a whole myriad of issues.

BOLLOM: Our business customers need to keep costs as low as possible. They may have more of an economic incentive than [a typical] residential customer, competing in cutthroat national or international markets where they have taken every measure they can to reduce.

I have one customer where close to 80% of their cost of business is electricity. They know exactly what they're using because it is their single biggest cost of production. They have to be as efficient as possible or somebody is going to be able to sell their product at a lower cost. I think, as you get to smaller and smaller customers, energy becomes just something else they have to deal with.

LAUGHLIN: Over the years, we've seen OSHA play a huge role in managing and creating the rules and regulations of the construction industry. And 10 years ago, you had guys with no safety harnesses and no safety glasses and hard hats were optional. Nowadays, we have a safety culture that has been created that really has gone over to the other side in a lot of ways, especially on larger projects. You watched the transition from "no safety harnesses" to "wearing safety harnesses," then to the more specific, 'we need the right kind of safety harness, something that's not going to break your neck when you fall 10 feet."

We saw that culture grow over the last 10 years in the construction industry. And here's an example of how it's stressed on the project and how you have to live by that culture: We had a guy out in West Virginia working on a Shell project. We were setting a base section down on the foundation, and he couldn't see the bolts lining up with the flange on the base. So he actually took his safety glasses off, laid them down, and looked underneath the base section to fit the bolts in place so they would pop through the hole.

The safety rep from Shell was right behind him when he did it. Not wearing safety glasses is a big no-no. He shut the project down, the whole mountain, because of that, called every one of the superintendents into the job trailer. It cost me $25,000 to have a man take his safety glasses off.

There is a challenge here, and that is the utilities make their living off of people using power. I look at it as a gas line; they want a constant flow of electricity, from a resource that they can rely on — coal-fired, power plant, combined power plant.

How does wind figure into the mix?
LAUGHLIN: The wind industry is a little different. It's an on-and-off switch, and there are very challenging system impacts that go along with that.

SOGLIN: Another question: the electric utility industry is facing a really aging workforce, in terms of the line workers who go out there in the weather. A lot of Baby Boomers will be retiring in the next five to 10 years. Do you have an adequate source of workers in terms of development for the construction work you're doing?

LAUGHLIN: No. We're constructing a building right now that will be a learning center for the wind industry. We invested a couple hundred thousand dollars with Texas Tech University to create a curriculum to take somebody from high school, put them through a two-year certification program. The challenging part is that when the wind [opportunities] pick up, people will complete only a year and then get out because somebody will offer them $30 an hour with one year's experience.

We don't really see an age of much over 40 years old on the construction side because of tower climbing. That's not a huge issue for us, unless we do a union project and you get what they send you. So the answer is that it doesn't really affect us. Our key management is typically 40 and over out in the field, the superintendents, the foremen, folks like that.

IB: Todd, all this talk about education. Do you have any special challenges educating the providers about what you need and how businesses are faring under that?

STUART: Nobody's ever accused me and some of my members of being wallflowers when it comes to the rates they pay and what they think they're going to be paying going forward. My background is actually political, and a lot of these energy debates were pretty arcane.

One of the reasons I became an expert is because nobody else cared until now. Health care issues were really hot, really debated. The last really big energy debate this country had was about 10 years ago on whether or not the state was going to deregulate. And again, that was very old school. That was about cost, price, affordability, and reliability. That debate is almost over. Now it's these new social policies coming out.

I think Wisconsin did the right thing 10, 15 years ago, in taking a deep breath. These are billion-dollar decisions. Let's go slow, be cautious. My group and Keith's group may argue over studies saying this is going to kill jobs or this is going to create tons of jobs, and it's the greatest thing since sliced bread. Okay. It's kind of Rock 'Em Sock 'Em Robots.

We know, though, that some of these policies are going to cost X-amount. They have in other states or other countries. And some of the renewable policies, we just know that, depending whatever study you pick, it's still going to cost X-amount. We know from, say, Germany that it costs like two cents a kilowatt-hour added to rates.

What does that mean for Wisconsin? Can people absorb that? Well, two percent, or a two-cent per kilowatt-hour for your customers, that might be 20% on average. Can a customer absorb that? Maybe. But it is going to be a huge debate. That it may be a debate that happens after the fact is the problem. All of a sudden, people will open their bills a year or two from now and say, "What is going on?"

And then they come after the politicians and the regulators after the fact. So we've got to be careful.

IB: I have a feeling that the provider's phone rings first.

BOLLOM: That would be our experience.

STUART: Well, politicians' phones ring pretty quickly, too. So we've got to be careful what we do. To use my fancy training from UW-Madison, is there crowding out? Is there opportunity cost? These are billion-dollar decisions.

Final Thoughts ...
REOPELLE: I would add that market pull really matters. And to Todd's point before about China, they have resisted regulating greenhouses gases. He's right. They don't have a Cap-and-Trade program. We don't either, of course. But they're building the most and biggest wind farms anywhere in the world. Because of that, they are getting a lot of these component manufacturers siting there.

We are going to be competing with other Midwest states, but this past October, at a Midwestern Governors Association Clean Energy Summit hosted by [Michigan] Governor [Jennifer] Granholm, speaker after speaker from around the world said we're really competing with California and China for these jobs. The focus was about the policies and they said we need to create those markets here or the jobs are going to go elsewhere.

LAUGHLIN: We're actually paying more per tower to be manufactured in Manitowoc and shipped to this area than if we had ordered them from South Korea and brought them over here. So there's the delta. We need to figure out how to create jobs when there's a delta of that scale.

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