Chapter One

What is energy?

Sometimes people use the term "energy" as shorthand for "electricity." Likewise, because various fuels are used to create electricity, some discussions about fuel availability address the issue solely from the perspective of the requirements for generating electricity.

In the Legislative Program Review and Investigations Committee's study, the term "energy" is used in its broadest sense to mean the various scientific processes by which heat or power are created and utilized for purposes such as:

• heating;
• cooling;
• lighting;
• operating equipment, including motor vehicles; and
• the generation of electricity.

What are the primary sources of energy?

Sources of energy include coal, petroleum, natural gas, nuclear, diesel, gasoline, and a variety of renewable fuels such as solar, wind, and fuel cells.¹ Primary fuel sources vary in different regions of the country, depending on local resources and access to reliable supplies.

The most commonly used fuel in the United States is petroleum. In 1999, it was the source of 40 percent of the energy consumed nationwide. The next two most commonly used fuels were natural gas and coal.²

In Connecticut, the top three fuel sources that year were petroleum, natural gas, and nuclear electric power. Very little coal is consumed in the state. Figure I-1 compares the market shares of the top fuel sources in the United States and Connecticut.³ (Petroleum is the primary source in all of the New England states, but the predominance of other fuels varies widely among the six states.)

Trends. Figure I-2 presents a timeline showing the evolution of fuel sources used within the United States since colonial days. Until the late 1950s, internal production and consumption of energy were nearly always in balance in the U.S. Since then, demand has grown more quickly than domestic production. In 2000, approximately one-quarter of the energy consumed in the U.S. was imported; a small amount of energy -- mostly coal -- was exported. Looking forward to 2020, the U.S. is expected to still be relying heavily on fossil fuels.⁴

Since the 1950s renewable energy has been a small, but consistent fuel source in the U.S. providing approximately 6 to 9 percent of the energy consumed nationally. Last year, 7 percent came from renewable fuels. About half of that was from hydroelectric power, one-third from wood, and smaller portions from waste products, geothermal, alcohol, solar, and wind.⁵

Figure I-3 shows the distribution of fuel sources used in Connecticut at 10-year intervals, beginning in 1960. Petroleum has consistently been the primary source; coal declined and natural gas increased. Renewable energy increased, but remains low. Nuclear power was growing, but plant closures reversed that trend. In addition, Connecticut, which used to export more electric power than it received from sources outside the state, has recently been a net importer of electricity.⁶ (See Appendix A for information about the future availability of specific fuel sources.)

Looking at components of the energy mix in Connecticut, similar changes in fuel sources are evident. In 1990, half of the energy used to generate electricity came from nuclear power, one-quarter from petroleum, and only 5 percent from natural gas.⁷ Currently, 43 percent comes from oil-fired plants (which in some cases are backed up by natural gas), one-third comes from nuclear, and 11 percent from natural gas (with oil as the backup).⁸

By 2020, it is projected as much as 60 percent of electric generation in Connecticut may be fueled by natural gas (in some cases backed up by oil) and 21 percent by nuclear. Coal is expected to continue at about 10 percent, similar to its current level, while renewable energy fuels will provide less than that.⁹ Figure I-4 displays historic and projected fuel data.

Half of the net generation of electricity in the United States in 1999 came from coal. Other major sources were nuclear (20 percent) and natural gas (15 percent). Petroleum only provided 3 percent.¹⁰

Within the New England bulk electric power system in 1999, nuclear and petroleum each provided about one-quarter of the fuel consumed to generate electricity. The next two most commonly used sources were natural gas (17 percent) and coal (15 percent).¹¹

The fuels used for home heating are also changing. Oil has been the predominant fuel in Connecticut since the 1950s, but its share of the market has declined from a high of 80 percent in 1960 to 54 percent in 1990 and an estimated 50 percent in 1996. Electricity, which increased to a high of 15 percent in 1990, was estimated to be in the 10 percent range in 1996. The fuel source gaining market share has been natural gas. It grew from 7 percent in 1950 to 26 percent in 1990 to approximately one-third of housing units in 1996.¹²

In the U.S. in 1999, half of the occupied housing units used natural gas for heating. One-third used electricity, and 10 percent used oil. Less than 1 percent used coal.¹³

Who uses energy?

Consumers of energy can be grouped into five major categories or energy-use sectors:

• residential sector -- living quarters for private households (with uses ranging from space and water heating, air conditioning, lighting, refrigeration, cooking, to running a variety of appliances);
• commercial sector -- service-providing facilities and equipment of businesses, all levels of government, other public and private organizations such as religious, social, and fraternal groups, and institutional living quarters (with the same kinds of uses as the residential sector);
• industrial sector -- all facilities and equipment used for producing, processing, or assembling goods (with primary use for process heat and cooling/powering machinery and secondary use of facility heating, air conditioning, and lighting);
• transportation sector -- all vehicles whose primary purpose is transporting people and/or goods from one physical location to another; and
• electric power sector -- all utility and non-utility facilities and equipment used to generate, transmit, and/or distribute electricity.¹⁴

The first four groups are often referred to as end-users. The fifth group represents energy consumed to generate electricity, as much as two-thirds of which may be lost during the process itself. Consumption data are available for each sector or with the electric power numbers incorporated into the end-user sectors. Using the latter method, Figure I-5 shows the proportion of energy consumed in 1999 by each of the four end-use sectors in several locations.

In Connecticut, the portion used by the industrial sector was considerably lower at 19 percent than for New England in total (28 percent) or the U.S. average (38 percent). Alternatively, the residential sector in Connecticut consumed nearly 30 percent of the total usage, a higher proportion than any other state in the country.¹⁵

Trends. Nationally, end-use sector energy consumption patterns over the last 50 years have been consistent. The industrial sector in the U.S. has always used the largest share, although the quantities consumed decreased some years. The other sectors, which have continuously held their ranks, are in decreasing order transportation, residential, and commercial.¹⁶

In Connecticut, consumption has shifted among the end-use sectors. During the 1960s, the industrial sector was the major consumer of energy. Since then, residential has been the predominant end-use sector. The transportation sector took over second place in the early 1980s, after alternating that position with the industrial sector during the 1970s. The commercial sector advanced from fourth to third in 1990, moving the industrial sector to last place at that time. Figure I-6 summarizes this information.¹⁷

Looking forward through 2020, the U.S. Department of Energy projects total energy consumption for all five sectors will grow at rates of between 1 percent and 2 percent annually. The higher growth rates are forecast for the commercial, transportation, and electric power sectors.¹⁸

How much energy is consumed in Connecticut?

In 1999, energy consumption in Connecticut totaled 839 trillion Btu or 256 million Btu per person.¹⁹ In comparison with other states, Connecticut ranked 33^rd in total expenditures, higher than all of the other New England states except Massachusetts.

In terms of per capita consumption, Connecticut ranked 45^th, in close proximity to all of the other New England states except Maine, which was 12^th. Table I-1 presents comparative 1999 data for Connecticut, the other New England states, New York, and the U.S. median.

Trends. Total energy consumption in Connecticut increased 65 percent since 1960.²⁰ Per capita consumption increased 27 percent during the same period. In both cases, most of the growth was in the first and the fourth decades. Figure I-7 displays total and per capita energy consumption since 1960.

When discussing energy quantities, it is worthwhile to look at how much is consumed for some specific purposes. Two areas of particular interest are electricity and gasoline.

From 1960 to 1999, the consumption of electricity by end-users in Connecticut increased four-fold from 25 million Kilowatt hours (Kwh) to 102 million Kwh.²¹

Between 1990 and 1999, total energy consumption in Connecticut increased 11 percent, while the amount of electricity consumed grew 10 percent. The trend among categories of consumers varied, however. As figure I-8 shows, total consumption by the residential sector increased less than 6 percent, but the amount of electricity used grew 12 percent. The industrial sector used more energy overall, but decreased electricity consumption by 4 percent.²²

Output requirements (which includes end-use consumption, losses during processing, and reserve requirements) are projected to increase 25 percent between 2000 and 2020, at a rate of 1.3 percent annually. The national growth rate is expected to be 1.8 percent annually during the same period.²³

Over the next 10 years, annual summer peak demand for electricity in Connecticut is expected to increase 1.3 percent annually. Growth in New England as a whole during that period is estimated at 1.5 percent annually.²⁴

Gasoline consumption in Connecticut in 2000 totaled 1.5 billion gallons, a 5 percent increase over 1994.²⁵ The pattern of growth has been very uneven, however, with swings up and down. Per capita consumption has increased as well, but it too has fluctuated. National trends have been more consistent, and with the exception of 2000, recorded small annual increases in total and per capita consumption. Table I-2 displays state and national data from 1994 to 2000.

Looking 20 years into the future, the Energy Information Administration expects overall U.S. energy demand will continue to increase, despite the growth in energy efficient products. A contributing factor is an anticipated decline in energy fuel prices, which reduces interest in conservation.²⁶

How much is spent on energy in Connecticut?

Estimated energy expenditures for Connecticut in 1999 totaled $7.1 billion or $2,167 per person. The state was near the U. S. median in both total spending and per capita expenditures. In comparison with the other New England states, only Massachusetts had a higher total. Per capita spending, however, was more diverse.²⁷ Table I-3 presents comparative data for Connecticut, the other New England states, New York, and the U.S. median.

Examining the data from the perspective of cost relative to the amount of energy used, Connecticut spent $11.62 per million Btu of energy consumed in 1999. This was the third highest rate in the country. Three other New England states were in the top 10 as well, while two were at or below the median. Figure I-9 shows specific figures and rankings for the states included in Table I-3.²⁸

While total energy expenditures per person in Connecticut are near the national median, consumers in the state do pay higher prices for some elements of the energy mix. Figure I-10 shows the cost per million Btu that state residents pay for different types of energy.

Trends. Since 1970, total expenditures for energy in Connecticut have gone from $1.2 billion to $7.1 billion, an increase of nearly 500 percent.²⁹ Adjusted for inflation, the increase was 38 percent. In the U.S., total expenditures increased nearly 600 percent, but only 57 percent adjusted for inflation.³⁰

It is worth noting costs can differ among end-use sectors. As previously discussed, The types of fuel used for different purposes may vary, and the activities of sectors certainly differ. In addition, some customers, particularly nonresidential ones, may receive special rates as economic incentives or for load management purposes. Customers may receive volume discounts or enter into contracts at fixed rates that do not change regardless of the prices in the marketplace at the time of delivery.

Figure I-11 shows total expenditures by end-use sector at intervals from 1970 to 1999.³¹ Table I-4 presents expenditures per million Btu for the same groups and time period, adjusted for inflation.

The transportation sector had the highest total expenditures and in most cases the highest per unit expenditures. In most years, the industrial sector had the lowest total expenditures, while the commercial sector was lowest on a per unit basis. As shown in Table I-4, although expenditures for all sectors have increased since 1970, when adjusted for inflation, they are lower than in 1980.

During the 1990s, the cost per million Btu of energy in Connecticut increased 1.7 percent. However, adjusted for inflation, the cost decreased 20 percent. Individual years varied. While a series of small increases occurred in the mid-1990s, there were succeeding decreases in 1998 and 1999.³² Although final numbers for 2000 and 2001 are not available, preliminary data show the sharply higher fuel prices experienced by consumers during late 2000 and early 2001 were replaced by the end of 2001 with prices comparable to 1999 levels.³³

U.S. Department of Energy estimates of energy prices for the next 20 years are mixed. The recent drop in oil prices is expected to reverse after 2002 in response to higher world demand for oil. However, the growth in price is estimated to be relatively slow through 2020. The price of natural gas is projected to increase slightly by 2020 as reduced demand and technological improvements are offset by lowered assessments of the natural gas reserves being discovered during exploratory drilling.³⁴

Nationally, average electricity prices are expected to decline over the next five years, but they may begin increasing again after that at least partly as a result of increases in the price of natural gas. Another factor that will likely affect prices is the number of and extent to which states actually deregulate their electricity markets.³⁵

In New England, an electricity pricing change expected in the next few years will revise the method of allocating costs within the electric power supply system. Premium pricing will be instituted, and congested locations will be charged more. At a minimum, this would affect the southwestern portion of the state because of the constraints on the existing transmission system there, but it could affect all of Connecticut depending on how broadly the boundaries of the congested regions are defined.

What entities are involved in the provision of energy in Connecticut?

Since the end of the 20^th century, relationships among participants in the energy industry have been changing, and new roles are emerging. A major factor has been implementation of electric competition legislation, which in Connecticut (and other states) requires electric utilities to restructure and separate the generation side of their companies from the transmission and distribution side. Existing companies are merging or consolidating operations, and new suppliers are entering the marketplace.³⁶

While private parties make most decisions regarding day-to-day energy-related tasks, government agencies also are involved. Figure I-12 identifies more than a dozen specific governmental entities and numerous types of businesses with responsibilities related to regulating, producing, and supplying energy for consumers in Connecticut. (See Appendix B for brief descriptions of the Connecticut governmental entities.)

Looking at the near future, a few of the governmental entities whose actions have the potential to strongly affect the Connecticut energy situation include:

• Connecticut Siting Council (CSC) -- statutorily established body whose jurisdiction includes approval of the location and type of electric transmission lines, fuel transmission facilities, electric generating/storage facilities, and electric substations in the state³⁷

_ also issues annual 20-year forecasts of electric power demand and resources

• Department of Public Utility Control (DPUC) -- statutory agency responsible for ensuring safe, reliable, modern, and fairly priced utility services (including electric and gas) are available in the state³⁸

_ with advice from the Energy Conservation Management Board (ECMB), approves annual plans from electric distribution companies aimed at implementing cost-effective energy conservation programs and market transformation initiatives, using funds from a statutorily mandated fee on electric bills³⁹

• Connecticut Clean Energy Fund -- statutorily established venture capital fund, managed by Connecticut Innovations Inc., that promotes the use of clean power in the state by investing in projects and companies⁴⁰
• Federal Energy Regulatory Commission (FERC) -- five-member appointed body within U.S. Department of Energy responsible for regulating aspects of the transmission and sale of natural gas, oil, electricity, and hydroelectric projects involving interstate commerce⁴¹

_ its proposal to consolidate the U.S. electric power industry into four regional transmission organizations (RTOs), including a single one for all of the Northeast, would require ISO-New England⁴² to merge with the New York and Mid-Atlantic system operators and change system procedures for supplying electricity to the New England states

_ must approve new gas pipelines and expansion of existing ones

What factors affect the demand for and supply of energy?

The demand for energy is determined by a mix of factors, the importance of which depend on the fuel supply involved and the time of the year. Individual factors influence the direction -- up and down -- as well as the volatility of demand. The supply of energy is also shaped by multiple factors, many of which are inter-related and parallel those that affect demand. Figure I-13 summarizes the major factors shaping the supply of and demand for energy.

In general terms, the components shown in Figure I-13 can be grouped into five categories:

• structural -- technological or societal changes that cause consumption requirements to shift (e.g., use of electricity versus manual power for a task or the creation of new reasons to use energy);
• governmental -- local, state, and federal controls and legislative policy decisions (e.g., siting regulations, electric deregulation provisions, and tax incentives for renewable energy);
• individual -- decisions made by consumers regarding how and when they will use energy (e.g., conservation efforts);
• uncontrollable -- events beyond the direct authority of anyone (e.g., geographic location of the state); and
• outcomes -- results from the interactions of other factors (e.g., fuel prices).

What issues are expected to affect future energy supply and demand?

The impact of natural and manmade events that occur throughout the world can have swift and unpredictable effects on the availability of energy. The results can disrupt the smooth flow of supplies, alter the price of fuel, heighten security concerns about the energy infrastructure, and upset the stability of the overall economy, all of which influence the supply of and demand for energy.

Assessing the potential availability and cost of energy in Connecticut in the future requires an examination of a number of disparate issues. Many of these elements are interrelated and contribute to maintaining a balance between energy supply and demand. However, most are outside the control of the legislature.

Economic conditions. Energy consumption levels are closely tied to economic activity. The demand for electric power and motor fuels increases during periods of business growth, and levels out or declines when the economy slows or enters a recession. These patterns are cyclical, but variable in length.

When economic conditions are good, businesses may turn out more products, causing them to use more resources. Residential use of energy tends to follow the pattern of the business cycle. When workers' pay increases, it allows them to purchase more items or bigger homes and cars, requiring more electricity and other fuels to operate.

When market conditions falter, businesses cut back on production and purchasing. Periods of job cutbacks cause a corresponding cutback in consumer purchasing. The reductions in energy consumption can cause energy prices to fall, resulting in decreased energy production. As the supply of fuel available to the marketplace decreases, prices increase. When they reach a sufficient level, production begins again, and supplies increase.

Throughout this cycle, most consumers will be faced with the need to continue using electricity to light their homes and offices, and when temperatures drop, a variety of fuels for heat. This will occur regardless of price.

The deregulation of products such as electricity and natural gas means their prices will likely become more volatile. The ability of consumers to adapt to this trend will be important given the more continuous nature of consumer demand for at least some minimum quantity of energy.

Energy conservation. Programs aimed at conserving energy may reduce the overall amount of energy consumed or change the type of fuel used. Actions that conserve energy -- either by curtailing usage or switching to more energy-efficient products -- are important mechanisms for altering the impact of high prices. Such programs also can benefit society by decreasing the consumption of resources and improving the environment.

Energy conservation programs often involve a psychological component that convinces consumers to change their behavior even when it may mean a reduction in physical comfort or an increase in work load. Successful programs require a variety of steps by assorted parties over an extended period of time.

For example, in the short-run, property managers and homeowners might install more efficient equipment (e.g., thermostat setbacks). In the medium-term, those who work or live in a building might adopt behaviors that use less energy (e.g., turning off the lights when they leave a room). In the long-term, society must adopt cultural changes supportive of behaviors that use less energy (e.g., preference for high gas mileage or alternative fuel vehicles).

It is worth noting products that help businesses operate more energy-efficiently can help them in other ways as well. For example, companies (including at least one in Connecticut) that use injection molding equipment in their manufacturing process have found installation of new equipment can cut their electricity costs for machinery, reduce air conditioning requirements, and lower noise levels within the shop area. In addition to the savings from operating the equipment, these businesses also may be eligible for rebates or incentives from their local utility company.⁴³

In discussing fuel efficient products, it is should be noted that although individuals may consume less energy using such appliances or vehicles, more people own a greater variety of appliances today. For example, while only 7 percent of the households in New England owned microwave ovens in 1980, by 1997 they were in 80 percent of homes. (Nationally, the corresponding figures were 14 percent and 83 percent.) People also may own more than one of the same kind of appliance. In 1997, 15 percent of households (in New England and the U.S.) had two refrigerators.⁴⁴ As a result, total energy consumption may increase.

Regulatory requirements. Local, state, and federal agencies place a variety of obligations on energy-related businesses and consumers. Some restrictions are imposed for public protection purposes. These may include constraints on where facilities can be located, what prices can be charged for commodities, and allowable levels of environmental emissions.

Sometime, governmental mandates are used to provide temporary safeguards during a period of transition. As part of the process of deregulating the generation of electricity in Connecticut, a standard offer rate (i.e., the amount customers who did not choose a new energy supplier would be charged for electricity by the electric distribution company) was put in place for the first four years of the process. Set to expire on December 31, 2003, termination of the standard offer rate is an issue currently being discussed by the legislature's Energy and Technology Committee.

Statutory requirements may also serve as vehicles to promote change. For example, C.G.S. Sec. 16-245a requires increasing portions of the output of licensed electric suppliers to come from two classes of renewable energy sources. Estimates of the electricity that can economically be obtained from those resources by 2005 are low.⁴⁵ However, the fact that a specific goal has been established may spur efforts to attain greater levels of output.

Public fiscal policies. Government also influences the energy area through its tax policies and grant programs. The imposition of sales taxes on products such as gasoline affects energy availability and can influence consumer behavior. (Even more aggressive efforts to use the tax system to change behavior though are evident in Europe where some countries tax motor vehicles based on weight.) Deciding whether or not to impose property taxes on items such as natural gas pipelines is another way government can have a role in the energy area.

Decisions regarding how much public money to allocate toward exploration for traditional fuel resources versus development of new fuel sources has the potential to hasten the availability of alternatives. Government can be a particularly important partner in efforts to develop projects involving new technologies. Such products often face financial obstacles until there is enough demand for the product to be manufactured at a competitive price. If the initial demand for such a fuel is low, government funding can be a key source of support.

Indeed, one of the energy policy strategies identified by the Connecticut Energy Advisory Board (CEAB) last year was support for emerging and renewable energy technologies. Among the potential actions listed to achieve that goal was increased state funding.⁴⁶

Technological advances. Research into new technologies can offer two types of benefits -- the potential to develop new ways of providing energy and the opportunity to create more energy-efficient and environmentally sensitive products.

Of course, technological advances also may increase the demand for energy or at least more reliable energy. More sensitive electronic equipment (e.g., computers) at ever cheaper prices means more customers will be using more electricity.

Fuel cell research is an example of an effort to produce another energy option. It is also an energy source of particular interest in Connecticut, given the presence of several private companies working on this technology. The production of fuel cells that generate sufficient quantities of energy within a reasonable physical size at a reasonable price has the potential to be part of the solution to concerns about electric generating capacity and security.

Another type of technological enhancement that might some day increase the availability of electricity is the potential of storing electric power. Superconductivity lines would retain unused electricity for discharge at a later time, providing an opportunity to take advantage of fluctuations in demand.

Evaluations of the feasibility of some of the new technologies must take into consideration the aesthetics of the products. For example, the noise and visual appearance of some types of wind machines would have to be weighed against the amount and cost of the power that can be derived from this renewable source.

In early 2001 when energy prices were rising, renewed interest in nuclear powered electricity was being expressed. New technological approaches to constructing nuclear generating plants and extending the useful life of existing plants have been developed since the plants currently operating in the U.S. were designed. An ongoing problem that remains is how to deal with the storage of used fuel rods. And, in the aftermath of the events of September 11^th, security concerns about the vulnerability of nuclear plants have arisen.

Grid reliability. The electric grid system moves electricity from the location where it is produced to the site where it is consumed. The electricity used by customers represents only one part of the system's capacity requirements. In addition, a proportional amount of reserve power greater than customer demand must be maintained to ensure reliable operations. The power being delivered also must meet voltage stability requirements.

Short surges and sags of power do occur routinely within the electric distribution system. However, modern electronic equipment, sensitive to such interruptions, makes them more discernable to the public.

Reliability is of great importance to an increasing number of businesses that use electronic processing systems (e.g., credit card companies) or computerized production lines (e.g., manufacturing plants). For them, even a short power outage can cost millions of dollars. As a result, there is increased demand for a new standard of dependability known as the "six 9s" (i.e., 99.9999 percent) of reliability. These energy consumers are likely to require on-site, backup systems that provide an uninterruptible power supply.

Transmission lines. Transmission lines represent the middle component of the infrastructure of the electric power system. At the front of the system is the equipment used to generate electricity. At the end, are a series of distribution feeders, substations, and transformers that move the electricity to customers.

The amount of electricity that can flow through transmission lines is dictated by the size and type of lines transporting the power. Lines with descending levels of voltage are used to move electricity from generating plants to overhead transmission lines to individual customers.

Although a region may have a sufficient supply of electric power overall, limitations of the transmission system may prevent delivery of electricity to a particular area in the quantities desired. If the problem is a lack of sufficient long-distance transmission lines able to transport power from the regions with excess supply to the areas with insufficient supply, problems will arise during periods of peak demand. However, in some places (such as southwest Connecticut and the Metro Boston area), a combination of limited local generation and transmission constraints can result in more frequent problems.⁴⁷

Solutions to transmission problems range from increasing the capacity of the lines to encouraging more conservation of energy. In Connecticut, more than a dozen projects to rebuild, upgrade, or build new electric transmission lines within or adjacent to the state have been proposed for completion within the next seven years.⁴⁸

A proposal to upgrade or install new lines requires approval by the Connecticut Siting Council. Processing time -- from the concept of a project through various required reviews to actual operation -- generally takes several years. Despite the societal benefits projects such as these may provide, community support may be limited. As the program review committee found in a previous study, siting decisions are often controversial and may be opposed by the towns where the project is to be located. Host communities worry about a range of real or perceived negative side effects including:

• health and safety risks (e.g., the possible effects of electromagnetic fields);
• diminished property values and other economic harm; and
• adverse environmental and social impacts.⁴⁹

Another issue with some of the proposed transmission line projects is who will actually benefit from them. The question has been raised whether those adjacent to the lines will receive additional or improved service as a result of the projects, or whether the primary beneficiaries will be energy users in other geographic areas.

In considering that question, it is important to recognize that Connecticut is not currently self-sufficient in meeting the demands of its citizens for electricity. During six of the years from 1990 to 1999, more electricity flowed into Connecticut than went out of the state.⁵⁰

As a participant in the power system managed by ISO-New England, Connecticut's need for electricity is balanced with the demands of the other states in the region, and power is shifted among areas as required. However, as noted above, the existence of surplus power in one area can only help another area if the electricity can be transported there. The installation of lines in Connecticut that seem to benefit only consumers outside the state, might in fact help the overall electric transmission system in New England by providing more flexibility for the transfer of power.

Distributed generation. The generation of electricity from self-contained generating units located at or near the point of end-use consumption is known as distributed generation. These types of facilities are expected to have an important role in the future as alternatives to the main electric power grid.

Distributed generation is appealing for security and reliability reasons, and it can help individual users as well as the overall electric transmission system. For example, if the grid fails as a result of a storm or sabotage, the availability of electricity from small, locally based generating sites would allow at least some customers to maintain power. In high load situations, distributed generation offers opportunities for portions of the system to go off-line, reducing demand sufficiently to allow all customers to retain power.

The production of distributed power has the potential of providing financial rewards to the owners of the generating facility, who may be paid to stay off the grid. Alternatively, as this technology improves and more sites are in operation, there may be opportunities to sell excess power to the grid system, which would also help with local reliability. The Connecticut Energy Advisory Board has identified removal of barriers to the use of distributed generation as one of the strategies that will help achieve the state's energy policy goals.⁵¹

Natural gas pipelines. A similar supply issue involves the amount of natural gas that can be brought into the New England region. While additional quantities of fuel are available from Canada and elsewhere, the capacity of existing pipelines is already heavily used. According to a recent U.S. DOE report, all of the New England states except Vermont are using 80 percent or more of capacity during peak months.⁵²

Several pipeline expansion projects are underway in the region, and others are being proposed. The Federal Energy Regulatory Commission is responsible for those siting decisions.

Environmental considerations. Many aspects of the energy system, regardless of the type of fuel involved, have potential environmental implications. Examples range from ongoing concerns about the effects of automobile emissions on air quality to the new attention being given to the ecological implications of dams used to produce hydropower.

Despite significant investments in emissions reducing equipment, creating electricity is still one of the major sources of air pollution in the U.S. Emissions do vary by region, but nationally two-thirds of all sulfur dioxide (SO₂) emissions, 28 percent of all nitrous oxides (NO_X), and one-third of all mercury released in the atmosphere come from electric power generators. In addition, one-third of all carbon dioxide (CO₂₎ comes from this source.⁵³

Methods of further reducing these levels include the use of emissions controls on smokestacks, new coal-burning and processing technologies, and cleaner fuels including renewables such as biomass and wind power. Another approach is to encourage more energy efficiency. The latter encompasses less use of energy as well as load management programs that encourage the use of electricity at off-peak times of day.⁵⁴

In Connecticut, the Energy Conservation and Load Management Fund, financed by an assessment on ratepayer bills, provides approximately $85 million a year for a variety of energy conservation activities including conservation and load management programs. The Energy Conservation Management Board issues an annual report that summarizes the results of funded programs, including reductions in peak demand and the quantities of NO_X, sulfur oxide (SO_X), and CO₂ avoided.⁵⁵

Efforts to resolve environmental concerns connected with the energy system require balancing individual demands for power with the desire of society for a healthy environment. Given the current structure and fuel mix of the energy system in Connecticut, decisions about how to ensure adequate capacity can have far-reaching consequences. Indeed, the importance of coordinating environmental and energy policies was another of the key policy strategies identified by the Connecticut Energy Advisory Board.⁵⁶

Transportation. In the United States, reliance on the automobile as a means of transportation is high, and it is the dominant mode of transportation to work. A review of 1990 census data found 87 percent of people who commuted to work used private vehicles to get there, and three-quarters drove alone. Only 5 percent used public transit services, while 4 percent walked to work. Three percent worked at home.⁵⁷

Data for Connecticut were similar. In 1990, three-quarters drove alone, 4 percent used public transportation, and 4 percent walked.⁵⁸

Reducing the consumption of gasoline and diesel fuel is beneficial to air quality, and it could facilitate the production of home heating oil by freeing up petroleum resources. Opportunities for reducing the amount of gas used include:

• adoption of Corporate Average Fuel Economy (CAFE) standards for all automobiles and light duty trucks, including sport utility vehicles and minivans;
• encouragement of ever more fuel efficient vehicles;
• increased use of alternative fuel (or dual fuel) vehicles; and
• support for the use of mass transportation systems.

The fuels consumed by mass transit vehicles, in particular buses, are also changing. Approximately 50 hybrid electric buses and a few fuel cell buses have been tested in on-road demonstrations. However, the big switch has been from diesel fuel to compressed natural gas, which significantly reduces the amount of pollutants emitted.⁵⁹

Another development expected to reduce traffic levels in the future is growth in the number of people working from home (i.e., telecommuting). This trend will ultimately affect other energy components as well. For example, companies able to reduce their office space needs, can decrease their overall energy consumption levels. At the same time, increased reliance on electronic communication will expand the number of customers concerned about the reliability of the electric grid system.

Safety and security. Safeguarding infrastructures that contain fuel supplies and generate power are important from a public health standpoint. So too is ensuring the safety of workers and local residents who come into proximity with fuel sources and other components of the energy system.

Security of the system is important because of the needs of businesses and individuals in the world today for a reliable electric power grid. Threats to the energy system can come in two forms. First, is the possibility of cyber attacks on today's highly computerized fuel distribution and utility systems. Second, is the threat of physical attacks against pipelines, nuclear plants, and other equipment.

Weather. Snow, ice, and wind storms in the local area can cause equipment damage that must be repaired. Actual weather problems in other locations can disrupt the flow of fuels into the state, while threatening weather can push prices higher in anticipation of disruptions.

Extreme temperatures -- both hot and cold -- cause consumers to use more fuel. Connecticut as well as the rest of New England have dual peak power demand seasons. In recent years, considerable attention has been given to the high demand for electricity during summer heat waves, but there are comparable peak demand days in the winter. This situation is important because it limits the time available to perform maintenance work on generating facilities and the transmission system.

Geographic location. The physical location of Connecticut at an outer boundary of the U.S. and the lack of indigenous fuel sources affect the ability of the state's citizens to obtain plentiful, low-cost fuel supplies. The small size of the state and the density of its population create traffic and energy congestion areas. These characteristics in turn complicate decisions regarding the siting of transmission and gas pipelines and efforts to provide economic development opportunities.

Summary

With the potential for declining availability and increasing prices at some point in the future, Connecticut's energy policies need to balance the quantity of energy used, the environmental effects of the type of fuel consumed, and the economic effects (direct and indirect) of the choices made.

The ability of the legislature to institute changes in the supply of and demand for energy is often indirect. It can place restrictions on prices and the location of facilities. Alternatively, it can offer financial incentives for energy conservation efforts and research into new technologies. It cannot control the decisions of private businesses regarding their willingness to sell electricity in Connecticut or continue operating a manufacturing plant within the state. Nor can it change the physical characteristics of the state or the unpredictability of the weather.

The General Assembly (along with other governmental entities) can articulate a vision for the future of energy in the state. It also can work to ensure other energy decision-makers, including federal regulatory authorities, are aware of the needs and concerns of energy consumers in Connecticut.

¹ The petroleum category encompasses a number of products including distillate fuel, jet fuel, kerosene, and motor gasoline. References to fossil fuels includes petroleum, natural gas, and coal.

C.G.S. Sec. 16-245n defines "renewable energy" as solar, wind, ocean thermal, wave or tidal energy, fuel cells, landfill gas and low emission advanced biomass conversion technologies, and other resources and emerging technologies that do not involve the combustion of coal, petroleum, petroleum products, municipal solid waste, or nuclear fission. In Energy Efficiency and Renewables Sources: A Primer (July 1998, p.5), the National Association of State Energy Officials notes a characteristic of renewable energy sources is that their supply is virtually endless.

² U.S. Department of Energy, Energy Information Administration (EIA), State Energy Data Report 1999, Table 1, Energy Consumption Estimates by Source and End-Use Sector, 1999.

³ EIA, State Energy Data Report 1999, Table 1.

⁴ EIA, Energy in the United States: 1635-2000, Total Energy, pp. 3-4, and Annual Energy Review 2000, p. xviii.

⁵ EIA, Annual Energy Review 2000 (August 2001), pp. xxxi, 9, and 260.

⁶ EIA, State Energy Data Report 1999, Table 53, Energy Consumption Estimates by Source, Selected Years 1960-1999, Connecticut.

⁷ EIA, State Electricity Profiles - Connecticut, Table 5. Electric Power Industry Generation of Electricity by Energy Sources, 1990, 1994, and 1999.

⁸ Connecticut Siting Council, Review of the Connecticut Electric Utilities' Twenty-Year Forecasts of Loads and Resources (October 2001), pp. 6-10.

⁹ Connecticut Siting Council, Twenty-Year Forecasts, p. 7.

¹⁰ EIA, Annual Energy Review 2000, Table 8.2 Electricity Net Generation, 1949-2000, p. 221.

¹¹ EIA, State Electricity Profiles, Table 5 (for each state).

¹² U.S. Census Bureau, Census of Housing, House Heating Fuel, and 1996 Update of Selected Standard Metropolitan Statistical Areas (SMSAs).

¹³ EIA, Annual Energy Review 2000, Figure 2.7 Type of Heating in Occupied Housing Units, 1950 and 1999, p. 54.

¹⁴ EIA, EIA Energy Definitions Glossary, October 2001. (In earlier definitions, the electric sector was referred to as the "electric utility sector," and non-utility power producers were included in the industrial sector.)

¹⁵ EIA, State Energy Data Report 1999, Table 1.

¹⁶ EIA, Annual Energy Review 2000, Figure 2.1a Energy Consumption by Sector Overview, p. 36.

¹⁷ EIA, State Energy Data Report 1999, Tables 53-57, Energy Consumption Estimates, Selected Years 1960-1999.

¹⁸ EIA, Early Release of the Annual Energy Outlook 2002 (November 2001).

¹⁹ EIA, Annual Energy Review 2000, Table 1.6 State-Level Energy Consumption, Expenditures, and Prices, p. 15.

²⁰ From 1960 to 1999, national consumption increased 115 percent. During this time, the population in Connecticut increased 29 percent, while the U.S. population increased 52 percent.

²¹ EIA, State Energy Data Report 1999, Tables 54-57.

²² EIA, State Energy Data Report 1999, Tables 53-57.

²³ Connecticut Siting Council, Twenty-Year Forecasts, p. 1.

²⁴ Connecticut Siting Council, Twenty-Year Forecasts, p. 2.

²⁵ U.S. Department of Transportation, Federal Highway Administration, Table MF-21. Motor Fuel Use for each year from 1994 through 2000.

²⁶ EIA, Annual Energy Outlook 2002, Overview (December 21, 2001).

²⁷ EIA, State Energy Price and Expenditure Report 1999, Table 1. Energy Prices and Expenditures Ranked by State, 1999.

²⁸ EIA, State Energy Price and Expenditure Report 1999, Table 1.

²⁹ EIA, State Energy Price and Expenditure Report 1999, Table 47. Energy Price and Expenditure Estimates by Source 1970-1999, Connecticut.

³⁰ EIA, State Energy Price and Expenditure Report 1999, Table 5. Energy Price and Expenditure Estimates by Source, Selected Years 1970-1999, United States.

³¹ EIA, State Energy Price and Expenditure Report 1999, Tables 48-51 Residential, Commercial, Industrial, and Transportation Sector Energy Price and Expenditure Estimates, Selected Years 1970-1999, Connecticut.

³² EIA, State Energy Price and Expenditure Report, 1999, Table 47.

³³ EIA, Short-Term Energy Outlook (December 2001) and Al Lara, "Heating Oil Prices Lowest in Nearly Two Years" (November 17, 2001), and "State's Gasoline Prices Are At Lowest Levels Since 1999" (November 29, 2001), The Hartford Courant.

³⁴ EIA, Early Release of the Annual Energy Outlook 2002.

³⁵ EIA, Early Release of the Annual Energy Outlook 2002.

³⁶ ISO New England Inc., Opportunities and Challenges Facing the Electric Power Industry in New England (September 2001), pp. 2-4.

³⁷ C.G.S. Sections 16-50g through 16-50aa

³⁸ The Digest of Administrative Reports to the Governor 2000-2001, Volume LV (November 2001), p. 275.

³⁹ C.G.S. Sec. 16-245m

⁴⁰ C.G.S. Sec. 16-245n

⁴¹ Federal Energy Regulatory Commission web site (www.ferc.gov).

⁴² The Independent System Operator (ISO) - New England Inc. is the not-for-profit corporation currently responsible for managing the New England region's electric bulk power generation and transmission systems.

⁴³ "All-Electric Injection Molding Saves Energy," Energy User News, November 2001, p. 18.

⁴⁴ EIA, New England Appliance Report (July 2001).

⁴⁵ Booz^.Allen & Hamilton, Clean Energy Market Assessment of Southern New England: Final Report (June 25, 2001) prepared for the Connecticut Clean Energy Fund, pp.44-45.

⁴⁶ Connecticut Energy Advisory Board, The Energy Policy Report (February 1, 2000), p. 21-22.

⁴⁷ ISO-New England, Opportunities and Challenges Facing the Electric Power Industry in New England, pp. 6-7.

⁴⁸ Connecticut Siting Council, Twenty-Year Forecasts, p. 17.

⁴⁹ Legislative Program Review and Investigations Committee, Siting Controversial Land Uses (January 1992), p.3.

⁵⁰ EIA, State Energy Data Report 1999, Table 53.

⁵¹ CEAB, Energy Policy Report, pp. 19-20.

⁵² James Tobin, Natural Gas Transportation - Infrastructure Issues and Operational Trends (October 2001), EIA Natural Gas Division, p. 13.

⁵³ Matthew H. Brown, "The Link Between Energy Efficiency and Air Quality," NCSL State Legislative Report, Vol. 25, No. 16 (December 2000).

⁵⁴ Brown, "The Link Between Energy Efficiency and Air Quality."

⁵⁵ Report of the Energy Conservation Management Board Year 2000-2001 Programs and Operations (January 31, 2001).

⁵⁶ CEAB, Energy Policy Report, p.30.

⁵⁷ ENO Transportation Foundation, Inc., Commuting In America II (1996), p. 49.

⁵⁸ Connecticut Department of Transportation, 1998 Long-Range Transportation Plan, p. III-18.

⁵⁹ U.S. Dept. of Energy, "Transit Agencies: At a Fork in the Road", Alternative Fuel News, Vol. 4, No.3, pp. 4-5.

Return to Table of Contents

Return to Year 2001 Studies