By David Wagman, Chief Editor

A lot of money seems destined to be thrown at the U.S. economy in the coming months and years. The energy sector stands to receive a substantial sum as part of the Obama administration’s plan to fund infrastructure modernization programs.

A cornerstone of the economic revival plan promotes renewable energy. A separate initiative proposes to regulate greenhouse gas emissions, including carbon.

In pursuing both initiatives as well as the broader electric power infrastructure investment, I would advise elected officials to keep in mind five principles: affordability, technical practicality, efficient use of capital, supply security and environmental responsibility.

Affordability: “Heat or Eat?” asks the cover headline on the most recent issue of Public Power magazine, published by the American Public Power Association. The question, which could have come from a nightmarish episode of “That ‘70s Show,” succinctly frames the issue. Households and businesses need to be able to afford electricity. Low-income households and competitively disadvantaged industries tend to be the most vulnerable to high electricity prices. Low-income households are at risk because a larger percentage of their monthly paycheck goes to paying their electric bill, at least compared with more affluent households. Competitively disadvantaged industries are vulnerable due to competition from low-cost producers around the world. Affordability must be discussed during the upcoming debates over technologies, long-term goals and public investment priorities. In an economic downturn, many more people and businesses must decide whether to keep the lights on or feed the family or meet their payroll.

Technical practicality: I defer here to remarks Dominion CEO Thomas Farrell made during his Keynote Presentation at POWER-GEN International on December 2. In part he said:

“...Now we are faced with rising public demand—not just for reliable power, but for clean power, alternative sources of power, renewable sources of power. Just throw another switch … a different kind of switch … a better, cleaner switch … and, while you are at it, make sure it doesn’t cost me any more money.

“…(I)n order to avoid present dangers it does us no good to manufacture new illusions… illusions that, if believed and accepted, will lead only to public frustration and cynicism….”

Farrell then cited recent calls to end U.S. dependency on foreign oil in 10 years and achieve 100 percent clean energy within 10 years. “Failing an extraordinary and unexpected breakthrough in technology these are impossible goals. These proposals seriously harm the debate because they distract people from the reality of where we find ourselves.”

Efficient use of capital: As an industry, we may have a rare opportunity to rethink some long-held business practices. For example, large scale central power stations have been a tenet of much electric power generation for decades. Does the model remain a valid 21st century approach? Wind farms in particular have grown in size to the point where a single facility’s generating capacity can reach a couple of hundred megawatts. But are we wise to invest—as, say the Pickens Plan proposes—in wind resources across the middle of the country if expensive and extensive transmission lines also must be built to carry the electricity to markets? Should we consider investing closer to load centers and build smaller-scale facilities that have little or no need for new transmission? After all, what the renewable resource may lack in quality could be made up for by having extra generating resources closer to load centers.

Supply security: I agree with Mr. Farrell that ending U.S. reliance on foreign oil within 10 years is unrealistic. I would add, however, that energy supply security should be considered as new investments are made. That approach favors coal and renewables even as it precludes neither uranium or natural gas. The caution, of course, is that natural gas used for electricity production competes against residential heating and commercial uses. Thus, it may make more sense to use the fuel for domestic heating and commercial purposes and look to non-competing fuels for electricity generation. And while the U.S. still is largely self-sufficient in terms of natural gas supply, we should look at last month’s European supply dust up as a cautionary tale. Periodic talk about forming an OPEC-like cartel for natural gas is another reason to weigh carefully the tradeoffs inherent in supply security.

Environmental responsibility: At times it seems some special interest groups won’t rest until every potential environmental hazard is so thoroughly regulated that all economic activity and commerce grinds to a halt. These groups have captured headlines and swayed much of the public discussion to the extent that their points of view appear to be the only ones with any legitimacy. Make no mistake, the environment must be protected. The challenge is to do it while respecting the legitimacy of the other four principles I outline here. To do any less would only exacerbate the challenges facing the economy.

These five principles—affordability, technical practicality, efficient use of capital, supply security and environmental responsibility—can help ensure that any investment headed toward the electric power generation industry is effectively and productively put to work.