- Steelmaking is an energy-intensive process that requires reliable and economically competitive energy supplies. Although the domestic steel industry has reduced its energy intensity by 30% over the past two decades, energy still constitutes up to 15% of the cost of steelmaking. Hence, all energy costs (principally for natural gas and electricity) have a huge impact on competitiveness in regional, national and global markets.
- As core manufacturers, it is critical that energy pricing be characterized by several principles: affordability, stability and predictability. Energy costs must remain competitive and not be subject to volatile short-term price increases or decreases. Pricing should also remain somewhat predictable to allow industry to plan for three, five and ten-year investments. Also, reliability of supply is an absolute must.
- On balance, Ohio steelmakers are generally pleased that passage of SB 221 in 2008 has minimized the threat of volatile energy prices, electric rate hikes and disruption of services. For example, consumers now have the choice of choosing from either a utility auction-based standard service offering or market-based price for electricity, which allows for “shopping” by industrial customers.
- The current law provides a reasonable framework to protect energy consumers, and great care should occur before any significant changes are made to its alternative energy and energy efficiency sections. To be sure, policymakers must understand that any energy efficiency initiatives or advanced and renewable energy programs that impose significant costs and regulatory burdens could negatively impact Ohio’s core manufacturing sector.
- Notwithstanding these points, there are three areas where government action is warranted:
- The state, and specifically the PUCO, needs to get the regulatory system for electricity in place. Fundamentally, the policy supporting energy efficiency standards is designed to delay the need for building expensive, new generating capacity for Ohio.
- In executing this policy, the state should be focused on identifying the sources of the cheapest forms of energy efficiency.
- For Ohioans, the measures that are most cost effective are those that provide energy efficiency and other benefits, such as improved competitiveness for Ohio’s employers and direct and indirect carbon reductions. Compliance with the renewable energy provisions of SB 221 is one of the most difficult issues facing the electric utilities because the cost of generating electricity through wind or solar is so much higher than the cost of generating using coal, nuclear or natural gas.For example, there is an important role for co-generation and waste energy recovery (WER) programs in Ohio, particularly for energy intensive industries. The state’s renewable requirements should be amended to include WER projects, thereby allowing manufacturers to choose different financing options to create and utilize readily available sources of alternative energy.
- The state should create incentives that result in greater investments by manufacturers in energy-saving equipment and processes. For this purpose, the initiatives of multiple state agencies need to be aligned. By connecting the Ohio Department of Development’s programs with utility programs, increased energy efficiency can be achieved at manufacturing facilities.