October 17, 2002

Related link: Council letter to RAND (10k PDF)

SPOKANE ? A recent RAND report that encourages the Northwest to build energy conservation and renewable resources to meet a portion of the future demand for electricity ignores the region's 22-year history of developing those resources and aggressive plans for doing so in the future, according to the Council.

The RAND report, issued in September, examined three different scenarios for diversifying the Northwest power supply by increasing reliance on energy conservation and renewable resources, particularly wind power. RAND concluded that increased reliance on conservation and renewables to 1) displace some new natural gas-fired power plants, 2) replace the energy that would be lost from breaching the four lower Snake River dams, or 3) serve the power needs of the region's Direct Service Industries (primarily, these are aluminum plants), would have no significant impact on the regional economy.

?The biggest disappointment I have is that they didn't talk to us,? Council Chairman Larry Cassidy said. ?RAND is a highly credible institution. We could have provided RAND with detailed, specific information about the region's energy supply, past accomplishments and future energy needs.?

Mark Bernstein of RAND, who discussed the study with the Council today in Spokane, said RAND ?did take a look at what the region has done, but we did not include it, and we should have.?

But he said RAND would not revise the report. ?The report is finished as is, and it does what it says it does,? he said.

Cassidy said the Council agrees with RAND that the cost of replacing the four lower Snake River dams with conservation and renewable resources is small in comparison to the $400 billion Northwest economy. But that doesn't justify dam removal, he said, which should be justified on the basis of the potential benefits to salmon and other activities compared to the cost of removing the dams and replacing the electricity supply. The RAND report also did not account for the cost of repaying the outstanding debt on the breached dams, which would not go away once the dams stopped producing power.

The Council reviewed the RAND report after it was issued and determined that while some of its conclusions are reasonable, others are not and the report is based on a misinformed forecast of future regional energy needs. The forecast, produced by the federal Energy Information Agency, is flawed in several important aspects, including:

• The EIA predicts that the Northwest will develop 123 megawatts of wind generation by the year 2020, when in fact more than 500 megawatts of wind power already have been developed in the Northwest.
• The EIA forecast is silent on the future development of energy conservation, when in fact more than 1,600 megawatts of conservation already has been developed in the region and at least that much more is available and cost-effective, according to the Council.
• The EIA forecast also says the Northwest will need 10,200 new megawatts of electricity by the year 2020, but the Council's forecast is for less than 7,000.

?The Council's objective, and its legal charge, is to develop regional electricity plans and fish and wildlife programs that are efficient and cost effective,? Cassidy said. ?The costs and assumptions used by RAND were produced by a federal agency that lacks the Council's detailed knowledge of the Northwest.?

Cassidy said the RAND report's conclusion that 20 percent of the EIA's forecast of expected gas-fired generation could be replaced with cost-effective conservation or renewables is credible, and an interesting contribution to regional thinking about how to meet the future demand for power. But the Council had concerns with other parts of the RAND report, and expressed these concerns to Bernstein today. The Council also plans to detail its concerns in a letter to Steve Rattien, director of RAND Science and Technology. These include:

• The report displays an alarming lack of recognition of the Pacific Northwest's history of aggressively pursuing energy conservation and renewable resources. The Council's Northwest Power Plan contains detailed information about electricity demand forecasts, ranges of future fuel prices and plans for meeting demand growth with cost-effective efficiency and generation resources. But RAND did not use this Northwest-specific information in its report. According to the Council's power plan, inexpensive efficiency improvements can be beneficial, wind power can provide a hedge against high natural gas prices, and solar power is too expensive at the present time.
• RAND's conclusion that 5,000 megawatts of conservation is available in the region at a price between $15 and $30 per megawatt-hour is more than three times higher than the Council's highest estimate of cost-effective conservation potential. Bernstein said RAND's estimate was intended be ?an upper limit? and was based on conservation investments in California, not the in Northwest.
• RAND's conclusion that conservation and renewable resources could displace the power demand of the direct-service industries (DSIs) in the region, primarily aluminum plants, and the four lower Snake River dams, was colored by the notoriety of the DSI and dam-removal issues.
• RAND has been used, perhaps unwittingly, to advance special-interest policies in the Pacific Northwest. This can only harm RAND's reputation as an objective research institution.

The Council is an agency of the states of Idaho, Montana, Oregon and Washington and is directed by the Northwest Power Act of 1980 to prepare a program to protect, mitigate and enhance fish and wildlife of the Columbia River Basin affected by hydropower dams while also assuring the region an adequate, efficient, economical and reliable power supply.

Contact:  John Harrison, Information Officer, 503-222-5161,

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