Energy policy in Kentucky

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Energy policy in Kentucky
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Quick facts
Major industry: Coal
Energy department: Kentucky Department for Energy Development and Independence[1]
State population: 4.4 million
Per capita income: $35,041
Energy consumption
Total energy consumption: 1.911 trillion BTU[2][3]
Per capita energy consumption: 438 million BTU
Energy spending
Total state energy spending: $23,149 million
Per capita energy spending: $5,301
Residential natural gas price: $14.11 per thousand cubic foot
Residential electricity price: 9.83 cents per kWh
See also
Energy on the ballot
Statewide fracking on the ballot
Local fracking on the ballot
Policypedia
Policypedia Energy logo.jpg
Energy Policy Project
Energy policy in the United States
Energy use in the United States
Glossary of energy terms
Energy policy in Kentucky
Fracking in Kentucky

Energy policy in Kentucky depends on geography, natural energy resources, how electricity is generated, how much energy consumers use, politics and the influence of groups such as environmental and industry organizations. Decisions by policymakers, such as state and local governments, utilities and regulatory agencies, affect all citizens economically and environmentally, and are generally geared toward providing reliable, affordable energy. The cost of energy affects not only home heating and electricity bills, and thus disposable income, but also economic growth, including jobs, investment and the cost of doing business in the state.

How energy is produced and consumed also has an impact on the environment and pollution. Energy policy in Kentucky, and many other states, focuses on decreasing emissions and dependence on fossil fuels by increasing energy efficiency and the use of renewable energy. As the infrastructure for producing and delivering renewable energy sources is not as advanced as it is for energy generation from traditional sources, these policies often require subsidies to make the produced energy affordable, and their effects are difficult to measure.

Energy policy involves tradeoffs between providing an affordable, consistent energy supply on the one hand, and limiting pollution and protecting the environment, on the other. How states attempt to balance these two differs between states, and often boils down to costs to consumers versus costs to the environment. This article provides general energy information about the state as the context within which energy policy is made, as well as information about major legislation and public and private groups that play a role in setting energy policy in the state.

See also: Energy policy in the United States for more information on energy policy.
See also: Fracking in Kentucky

Energy overview

State facts

Below are quick facts about Kentucky’s energy climate.

Kentucky

  • is a net electricity exporter.
  • has fossil fuels in the form of coal, natural gas and petroleum.
  • has some renewable energy in the form of hydroelectric power, biomass and biofuels and solar energy.
  • has two ethanol plants that generate about 35 million gallons annually combined.
  • produces the third largest amount of coal in 2011, about 10 percent of the national's net coal production.
  • requires blended ethanol and motor gasoline fuel in the Louisville metropolitan region.[4]

In Kentucky

  • energy consumption per person ranks in the top ten U.S. states.
  • more than half of the electricity consumed comes from coal.
  • electricity is the main source of energy used in home heating.
  • renewable energy sources made up about 2 percent of net energy generation in 2011.
  • ninety-three percent of net electricity generation in 2011 was generated from coal.
  • industry is the largest energy-consuming sector in the state.[4]

Available energy resources

Kentucky has traditional energy resources mainly in the form of coal and smaller amounts of oil and natural gas. More than 2,500 trillion BTU of energy are produced annually from coal. Annual natural gas production tops 120 billion cubic feet. In addition, Kentucky has a small production of crude oil from under the Mississippian limestone and sandstone in eastern and western regions of the state.[4]

Kentucky has renewable energy resources which contributed less than 4 percent of the energy for electricity in 2011 according to the U.S. Energy Information Administration (EIA). Kentucky's largest source of renewable energy comes from hydropower, which accounts for 75 percent generated total. The remainder mostly comes from biomass. Kentucky's first large-scale solar power facility was constructed in 2011.[4]

Consumption and prices

As shown on the pie chart in 2011,, 42 percent of Kentucky's energy use was for industrial, and one quarter for transportation; the rest was used mostly in residential and commercial buildings--for heating, cooling, lighting and other functions. Kentucky's industrial sector includes manufacturing cars, biotechnology and life sciences and transportation and logistics. Coal is also an important section of the state's energy industry and economy. Most of the energy used in the state is in the form of coal, followed by petroleum and natural gas.[4]

Energy consumption in Kentucky
KY energy consumption chart.png

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Gasoline is mostly used in transportation in Kentucky. Per capita petroleum consumption in 2014 ranks in the top ten states nationally. Generally the price of gasoline in the state tracks closely to the national average.[6][7][8] Kentucky has a 28.5 cent per gallon gasoline tax, in addition to a 1.4 additive tax, totaling 29.9 cent per gallon of gas, making Kentucky the 18th most expensive gas tax in the nation.[9]

Comparisons tables

The table below compares Kentucky's consumption and spending for energy, as well as prices for gas and electricity, and carbon emissions to those of West Virginia, which has similar resources and consumption needs because of climate and geography. Also given are the U.S. averages and the state rankings. All rankings are from highest to lowest, so, for example:

  • Kentucky's rank of 12th in carbon emissions meaning that carbon emissions higher than in West Virginia which has a ranking of 21st.
  • Likewise, per capita income in Kentucky similar to West Virginia, which at 48th ranks two places behind Kentucky's ranking of 45th in per capita income.
  • The two states are similarly ranked in the per capita consumption, overall spending and utility prices.
  • Per capita energy consumption in Kentucky (at 10th) is somewhat similar to West Virginia (at 16th) and
  • Per capita energy spending in Kentucky is somewhat similar since it ranks 12th to West Virginia's ranking of 20th.
  • Gas prices are similar in Kentucky and West Virginia ranking 28th and 29th. Electricity prices are very similar in Kentucky, which was ranked at the 46th highest price and West Virginia 48th.

Kentucky produced 10 percent of the nation's coal making it the third largest coal producing state. Basins within the state hold minor reserves of traditional energy reserves, mainly oil and natural gas. Of its total generated electricity, 92 percent comes from coal. Because Kentucky has many traditional energy resources, it has low energy prices.[4]

Consumption and Expenditures Comparisons Summary
Type KentuckyWest VirginiaU.S. Figures
FigureU.S. Rank*FigureU.S. Rank*Totals
Population4.4 million261.9 million38313.9 million
Per Capita Income Average$35,0414534,47748$42,693
Total Consumption1,911 trillion BTU18724 trillion BTU3697,301 quadrillion BTU
Per Capita Energy Consumption438 million BTU10390 million BTU16312 million BTU
Total Spending on Energy$23,149 million23$8,888 million37$1,394,088 million
Per Capita Spending on Energy$5,30112$4,79220$4,474
Price of Residential Natural Gas, dollar per thousand cubic feet$9.9528$11.2529$12.48
Price of Electricity, cents per kWh$9.60469.594812.31
Total Carbon Dioxide Emissions, million metric tons (2010)150.71298.9215,631
*Rank is from highest to lowest.

Electricity is the most common home heating source in Kentucky, heating almost half of the homes in the state. Natural gas is the second most common home heating source, at 39.1 percent, followed by LPG, other sources and then fuel oil.

See also: State Energy Rankings to compare all 50 states
Consumption of energy for heating homes in Kentucky
Source Kentucky 2011 U.S. average 2011
Natural gas 39.1% 49.5%
Fuel oil 1.2% 6.5%
Electricity 49.3% 35.4%
Liquid Petroleum Gases (LPG) 6.7% 5%
Other/none 3.7% 3.6%

Production and transmission

Kentucky produced 2,841 trillion BTU of energy in 2011. Of that more than 92 percent came from coal and almost 5 percent came from natural gas. The remaining 3 percent came from what the U.S. Energy Information Administration classifies as 'other,' which is "assumed to equal consumption of all renewable energies except biofuels."[4]

Energy production by type in Kentucky, 2011
Type Amount Generated
(trillion BTU)
% of State % of USA
Crude oil 13.5 0.48% 0.11%
Natural gas 134.5 4.73% 0.51%
Coal 2,623.8 92.37% 11.9%
Biofuels 5 0.18% 0.26%
Other 63.8 2.25% 0.9%

All of the coal produced and consumed in Kentucky is mined from Kentucky's two companies: Warrior Coal LLC and River View Coal LLC. Kentucky's transmission systems are Midwest Independent Transmission System Operator (MISO) and PJM Interconnection (PJM). They are under the Regional Transmission Organization (RTO).[4]

Natural gas is used to produce only around 5 percent of electricity, while the rest is produced with crude oil and renewable energy resources. Natural gas is extracted in the eastern part of Kentucky comes from Big Sandy, the largest natural gas field in the Appalachian Basin. The interstate pipeline companies that move the gas from the production area to local utilities and through to other states include: ANR Pipeline Co., Columbia Gas Transmission Corp., Columbia Gulf Transmission Co., Midwestern Gas Transmission Co., Tennessee Pipeline Co., Texas Eastern Transmission Corp., Texas Gas Transmission Co. and Trunkline Gas Co. The Federal Energy Regulatory Commission regulates the rates they charge, the services they provide to the local distribution centers (LDCs) and the construction of new pipelines.[4]

In Kentucky there are currently 30 municipal electric utilities and 32 private electric utilities. Natural gas is available from 28 companies, 50 intrastate pipeline gas companies and 172 municipal, housing authority, or college providers.[10][11]

Where electricity comes from in Kentucky[12]
Type Amount generated (MWh) % of state** % of U.S.**
Petroleum-fired 8,000 0.12% 0.03%
Natural gas-fired 74,000 1.08% 0.01%
Coal-fired 6,472,000 94.22% 0.37%
Hydroelectric 185,000 2.69% 0.06%
Other renewables 21,000 0.31% 0.01%
Total net electricity generation 6,869,000 100% 0.17%
**Note: Because the U.S. Energy Information Administration (EIA) does not include all of a state's energy production in these figures, the EIA totals do not equal 100 percent. Instead, we have generated our own percentages.

Energy policy

Policy Issues

The low price of electricity in Kentucky may result from the fact that coal is not yet heavily regulated and because Kentucky did not enact its first renewable energy regulations until 2008. Coal is becoming more expensive in other states because it is being so heavily regulated, due to its carbon emissions.[4][13][14]

See also: Fracking in Kentucky

Energy policy is made, executed and influenced by many organizations, both public and private, and is codified in the laws and regulations of the state. Each state’s energy policy involves tradeoffs in which energy production and prices are weighed against environmental concerns and efficiency. Kentucky is below average when it comes to adopting energy efficiency and renewable energy use. In 2007 Kentucky's Energy Act "recommended that utilities examine specific issues regarding energy efficiency and related programs." The state's first energy plan was suggested in 2008. This plan proposed the use of efficiency measures should offset no less than 18 percent of the state's projected energy demand in 2025. Legislation in 2010 changed volunteer plans into requirements for demand-side management programs.

Kentucky ranked 39th on the Energy Efficiency Scorecard produced by the American Council for an Energy-Efficient Economy.[15][16] There are differing estimates about the economic impact of these mandates in terms of costs that may affect prices and jobs. There are differing estimates about the economic impact of these mandates in terms of costs that may affect prices and jobs, as well as the impact on the environment and pollution. Thus, for example, there are many new studies of what is called the "rebound effect" which refers to the fact that "some of the theoretically estimated gains in energy efficiency will be eroded as consumers consume additional goods and services."[17][18]

Some studies claim that higher electricity prices are in part the result of the Renewable Portfolio Standard (RPS) that mandates a minimum amount of renewable energy (which is more expensive than coal or natural gas) be used for generating electricity. According to a report called "The Status of Renewable Electricity Mandates in the States," by the Institute for Energy Research, the cost of electricity in states with RPS were on average 38 percent higher in 2010 than in states without RPS.[4][19][20]

Major legislation

  • Kentucky's Energy Act, (2007) encourages utilities to analyze issues in relation to energy efficiency and related programs. Since 2007 rules have been adopted to allow the Kentucky Public Service Commission to create standards applied to utilities that use demand side management programs. Kentucky's most strict rule from 2008 requires at least 18 percent of the state's estimated energy demand to be offset with renewable energy measures by 2025.[21]
  • HB 240, (2008) seeks to enhance the energy performance of all state-leased and state-owned buildings. It mandates that all built or renovated municipal buildings funded by Kentucky must satisfy high-performance building regulations. To satisfy the high-performance building standards, the building should operate by increasing environmental performance and economic value over time; reducing waste; including environmentally-friendly products and materials; and increasing productivity and satisfaction of employees through energy-efficient systems. Leadership in Energy and Environmental Design (LEED) certification is required before construction.[22]
  • Incentives for Energy Independence Act, (2007) (IEIA) provides tax incentives through the Kentucky Economic Development Finance Authority (KEDFA). Qualified actions include retrofitting, construction, upgrading to alternative fuel production or gasification facility. The incentives may be a 100 percent refund of all state sales tax paid on the energy efficient facility, credit on approved company state income tax up to 100 percent, up to 4 percent of wages of workers whose employment was created because of retrofitting, construction, or upgrading to qualified facilities and up to 80 percent credit on tax paid for traditional resources as feedstock.[23]
  • Clean Energy Opportunity Act, (2012) aims to "promote energy independence and security by diversifying the portfolio of energy sources used for generating electricity for Kentucky electric customers; stabilize long-term energy prices and encourage economic growth; and create high-quality jobs, training, business and investment opportunities in the Kentucky energy sector." This mandates utilities to supply renewable resources of not less than 12.5 percent of sale from regulated electricity utilities. In addition they must pass the threshold of a 10.25 percent decrease in energy consumption through multiple energy efficiency initiatives.[24]
  • Kentucky Executive Order 2006-1297, (2006) was created to encourage the construction and design of schools that were more energy efficient and sustainable. Each board of education is required to enroll in the Kentucky Energy Efficiency Program for Schools (KEEPS) through the Kentucky Pollution Prevention Center (KPPC) in coordination with the University of Louisville J.B. Speed School of Engineering. Each board should report the status of potential and/or actual energy consumption reduction, energy savings running facilities so that a clear management plan can be developed.[25]

Government agencies and committees

Policypedia
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State energy policy

State fracking policy

Energy policy terms

Fracking in the U.S.

Energy use in the U.S.

Energy policy in the U.S.

State environmental policy


See also
Local fracking on the ballot

Statewide fracking on the ballot

  • The Kentucky Public Service Commission (PSC) is an independent regulatory agency that has been regulating Kentucky public utilities since 1934, including those that are municipally-owned. Types of utilities regulated include electric, natural gas, water and sewer utilities and certain aspects of gas pipelines. More than 1,500 utilities are under the agency's jurisdiction. Most of these must obtain PSC approval before they set new rates; issue stocks or bonds; or undertake major construction projects, such as water wells, power plants or transmission lines. The PSC is composed of three full-time commissioners who decide the cases brought to the PSC for changes in utility operations, rates and for construction projects. Commissioners are appointed by the Governor and confirmed by the State Senate for staggered, six-year terms. The commissioners’ office is under the direction of a chairperson, who is appointed by the governor for a two-year term and has oversight of all PSC staff related activities.[27]
  • Kentucky's Department for Energy Development and Independence is driven to increase the quality and security of life for all neighbors of the state. To achieve this, they participate in creating efficient lasting energy solution and plans. Programs through the department include programs for schools, industry, buildings, homeowners and transportation. Divisions that focus on Kentucky's energy initiatives are divided into the following groups: biofuels, carbon management, efficiency and conservation, energy generation transmission and distribution, fossil energy development and renewable energy.[28]
  • The Kentucky Department of Natural Resources administers state mining laws. The commissioner has 14 duties including overseeing the office of Mine Safety and Licensing.[29]

Major organizations

  • Kentucky for the Commonwealth is an organization with more than 7,500 members statewide. Chapters are located in multiple counties that direct the goals and strategies of the group. The groups practices leadership development, communication, voter empowerment education about various energy issues. One of their programs, New Power in Kentucky, seeks to create thousands of new jobs, opportunities for upcoming generations well-rounded communities through developing renewable energy sources. The New Power Program seeks to address issues related to coal mining and its effects on resources and neighborhoods; transition to safer and cleaner energy with an emphasis on job creation; reform tax structures; enable voting rights; and inform the public on their representatives.[30]
  • The Kentucky Sustainable Energy Alliance represents a group of around 40 people and organizations with the same understanding of Kentucky's urgent economic, environmental and energy future. The group promotes sustainable, affordable clean energy solutions for the state. They meet together to create ideas, resources, political support and community understanding so that all Kentuckians have the opportunity to save energy and money.[31]
  • The Kentucky Industrial Utility Customers (KIUC) is an association of companies that consume large amounts of energy. They created the group to join together to help find solutions to problems related to the supply of natural gas and electric power to industrial facilities in Kentucky. The group's main focus is the cost of energy and the important role that resources as well as prices play in their production costs. Such issues directly impact businesses' competitiveness and production. KIUC is known by the Public Service Commission and has representative members communicating with the State Legislature to advocate fair legislation.[32]
  • The Center for Applied Energy Research (CAER) is located at the University of Kentucky. It is a non-academic unit that researches energy technologies that can improve the environment. The research center specializes in coal contributions, conversion utilization process technologies; fuel consumption; coal combustion by-products; engineered fuels; derivation of high added-value chemicals and materials; and renewable energy.[33]

In the news

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Kentucky Energy News Feed

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See also

External links

References

  1. National Association of State Energy Officials, "Kentucky," accessed March 9, 2014
  2. These figures come from the U.S. Energy Information Administration State Profiles and Energy Estimates, Kentucky Overview. Statistics for population and per capita income are for the year 2012; consumption and spending estimates are for 2011; and prices are for October 2013
  3. U.S. Energy Information Administration, "Kentucky Overview," accessed March 7, 2014
  4. 4.00 4.01 4.02 4.03 4.04 4.05 4.06 4.07 4.08 4.09 4.10 U.S. Energy Information Administration, "Kentucky Profile Analysis", accessed March 7, 2014
  5. This chart depicts the state's energy consumption as reported by the EIA for 2011. Click the image to enlarge.
  6. Gas Buddy, “Historical Gas Charts,” accessed March 7, 2014
  7. State Master, "Energy Conference 2014," accessed March 7, 2014
  8. To compare current gasoline prices in Kentucky to the U.S averages, go to GasBuddy.com
  9. Tax Foundation, "State Gasoline Tax Rates, 2009-2013," March 21, 2013
  10. Think Kentucky, "Utilities in Kentucky Report," January 2013
  11. Kentucky Public Service Commission, "Information about Utilities," accessed March 7, 2014
  12. These figures come from the EIA State Profiles and Energy Estimates U.S. Energy Information Administration, "Kentucky Profile Analysis," accessed March 7, 2014
  13. The Institute for Energy Research, "The Status of Renewable Electricity Mandates in the States," accessed March 16, 2014
  14. Note: This text is quoted verbatim from the original source. Any inconsistencies are attributed to the original source.
  15. For a full explanation of how the ACEEE calculates this ranking see the executive summary of their report.
  16. American Council for an Energy Efficient-Economy, "State Energy Efficiency Policy Database," accessed February 27, 2014
  17. International Risk Governance Council, "The Rebound Effect: Implications of Consumer Behavior for Robust Energy Policies," accessed March 3, 2014
  18. Scientific American, "How Bad Is the Rebound from Energy Efficiency Efforts?," May 21, 2013, accessed March 3, 2014
  19. The Institute for Energy Research, "The Status of Renewable Electricity Mandates in the States," accessed March 16, 2014
  20. Manhattan Institute, "The High Cost of Renewable-Energy Mandates," February 2012
  21. American Council for an Energy-Efficient Economy, "Kentucky," accessed March 7, 2014
  22. Database of State Incentives for Renewables & Efficiency, "Summary," accessed March 7, 2014
  23. Think Kentucky, "Incentives for Energy Independence Act (IEIA)," April 19, 2013
  24. Downstream Strategies, LLC, "The Opportunities for Distributed Renewable Energy in Kentucky," June 18, 2012, accessed March 7, 2014
  25. Database of State Incentives for Renewables & Efficiency, "Energy Efficiency Programs for Schools," April 19, 2013
  26. Kentucky Legislature", Leadership and Standing Committees," January 30, 2014
  27. Public Service Commission, "Kentucky," accessed March 7, 2014
  28. Energy and Environment Cabinet, "Department for Energy Development and Independence," accessed March 7, 2014
  29. Kentucky Revised Statutes, " 351.070 Duties of the Commissioner," accessed December 20, 2012
  30. Kentucky for the Commonwealth, "About Us," accessed March 7, 2014
  31. Kentucky Sustainable Energy Alliance, "About Us," accessed March 7, 2014
  32. Kentucky Industrial Utility Customers, "About Us," accessed March 7, 2014
  33. University of Kentucky, "About CAER," accessed March 7, 2014