Baker Center Report to Guide State in Developing Energy Policy

With the energy industry changing rapidly, Tennessee should craft an energy policy that will allow the state to benefit both economically and environmentally.

That’s the crux of a report done for the state by UT’s Howard H. Baker Jr. Center for Public Policy. The Sparks Bureau of Business and Economic Research at the University of Memphis was a partner on the project.

Last year, the Tennessee legislature funded the Baker Center to study the economic feasibility of creating and utilizing a statewide comprehensive energy plan. The study was to look at the state’s current and future energy supply and demand, existing energy policies, and emerging energy challenges and opportunities.

“This report is intended to serve as a foundational resource to support policymakers and the public as they deliberate on state energy policy and ultimately a statewide energy plan,” wrote lead author Matt Murray, director of the Baker Center.

“If properly positioned, Tennessee may be able to take advantage of changes that are taking place and secure economic development gains and other benefits like environmental improvement for the state’s residents and businesses.”

To support this, the report points to several facts:

  • Tennessee households have relatively high annual energy costs because of the inefficiency of residential housing and wide temperature fluctuations over the course of the year. Promoting energy efficiency and conservation could free up Tennessee residents’ purchasing power and improve their quality of life.
  • Targeted economic development programs focusing on the state’s energy sector could allow the state to create a new industry niche. Several factors make Tennessee prime for this, including the state’s central location, attractive tax and business climate, skilled manufacturing workforce, existing initiatives in biomass and solar power, and energy expertise associated with Oak Ridge National Laboratory and UT.
  • Given its effort to develop solar and biomass resources for electricity generation and motor fuel, Tennessee is poised for private capital investment, job creation, and the production of underlying technologies.

The report also points to several reasons why Tennessee’s energy future is going to look quite different than the present:

  • The United States is likely to continue reducing its dependence on foreign energy sources and may become energy-independent in the reasonably near future.
  • Coal production in the region will likely decline for the foreseeable future due to both federal limits on carbon emissions and the higher costs of extracting coal reserves.
  • The Tennessee Valley Authority will continue to lead electricity generation in the state, but the amount of power generated by households and private businesses will increase as new technologies emerge.

The report suggests that these and other changes pose challenges, but also opportunities, for the state.

For instance, abundant shale oil and natural gas will drive energy prices down and help fuel the manufacturing renaissance in Tennessee and nationwide. While the future of shale development in Tennessee remains uncertain, the state’s maturing biomass industry could provide an economic boost to Tennessee’s farmers and create new jobs.

The researchers emphasize that stakeholders must be engaged in developing a state energy plan and the plan must be driven by well-defined goals. The plan should take into account sustainability, economic development and competitiveness, renewable portfolio standards, energy efficiency, system resiliency and security, and price stability and affordability.

Researchers also caution that tradeoffs are often needed to ensure a state’s energy goals don’t conflict with themselves. For instance, economic development must be balanced with environmental stewardship.

The report puts the state’s energy sector in a global, national, and regional context. It looks at energy markets as well as policy-making bodies. It is intended to be a resource for policymakers and the public and a foundation for policy development.

“These external influences place significant limits on state policymakers and their ability to affect energy sector outcomes, including energy supplies and prices,” the report states. “It is critical that this external environment be thoughtfully considered when state policy is developed because it will help shape the state’s role in domestic and world energy markets.”

CONTACT:

Amy Blakely (865-974-5034, ablakely@utk.edu)