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Viewpoints from the Boardroom: Enduring Energy and Enduring Hydro

Kristina M. Johnson took her expertise in renewable energy from government service to the private sector, founding Enduring Energy LLC and Enduring Hydro LLC in 2011. She says the foundation of these businesses is to reduce greenhouse gas emissions through energy efficiency and renewable energy such as hydropower.

By Hydro Review staff

Kristina M. Johnson
Kristina M. Johnson

Having spent most of her life in either academia or business, Kristina M. Johnson found herself in a position to help shape U.S. energy policy when she was confirmed as the undersecretary for the U.S. Department of Energy in 2009.

But by October 2010, Johnson felt as though she'd done what she came to Washington, D.C., to do. The itch remained, however, to continue the work she started there, but back in the private sector. In 2011, she and some of her closest associates at DOE came together to form Enduring Energy LLC, a privately held company that focuses on renewable energy consulting. She also founded a second company, Enduring Hydro LLC, which acquires, invests in and develops new hydroelectric facilities, building on Johnson's bedrock belief that hydropower is the cornerstone of America's renewable energy future.

Hydro Review recently sat down with Johnson to discuss these two companies, their goals, and where she thinks the future of renewable energy in general - and hydropower specifically - is headed. The following is a transcript of that discussion.

Q: What are your basic goals for Enduring Energy and Enduring Hydro?

Johnson: Enduring Energy consults with entities that can contribute to President Barack Obama's goal to have 80% clean energy by 2035. Endurying Hydro is focused on hydropower's specific role in this goal - bringing on 14,000 MW of new hydropower by 2035 through upgrades and powering unpowered dams to increase hydroelectric generation. I think that's very modest, very reasonable. So we've been advising major companies on how to do that most cost-effectively. We built a small, cohesive team that could really move these projects forward.

We're focusing on three things: hydro, energy conservation and new clean technologies.

Q: Why does hydroelectricity figure so prominently in your plans?

Johnson: First of all, hydropower is dispatchable. It's seasonable, but water flows all the time, whether the sun is shining or not or whether the wind is blowing or not. That ability to provide continuous electricity is unique to hydropower, geothermal and bioenergy when it comes to renewable sources.

The second reason is there is already a tremendous installed base. It's the largest renewable in the country. A lot of the base is old and needs upgrades and modernization, and that's great for rebuilding our infrastructure, great for manufacturing and great for generating new jobs.

The third reason is the untapped potential. We have 80,000 dams in the U.S., and 97% of those are not producing electricity. I don't think hydro will necessarily replace coal-fired electrical generation. But it can fill in and provide ancillary services, such as frequency regulation and load balancing, particularly as states such as California move toward a renewable portfolio standard of 33% by 2020 and demand response. Hydropower fills in and can balance variable wind and solar electricity.

Q: Why go from the public sector to the private sector?

Johnson: I felt we did everything we could do while I was undersecretary. First we deployed - through a rigorous, peer-reviewed process - $37 billion in support of clean energy through the 2009 Recovery and Reinvestment Act (ARRA). These funds supported energy efficiency, renewable energy, carbon capture, storage and grid modernization, and education, creating thousands of jobs, which doubled the amount of renewable energy in the U.S. We stood up the Advanced Research Project Agency for Energy, ARPA-E, and restructured the small business innovation research program to accelerate job creation through the successful Xcelerator program. We prepared a strategic technology energy plan (STEP) for achieving 80% reduction in carbon dioxide emissions by 2050, with an interim goal of 80% clean electricity by 2035. We then created a coordinated, five-year budget to carry out this plan.

The net national investment required to achieve an 80% clean electricity goal by 2035 is $1 trillion, or roughly $40 billion per year, for 25 years. This is about 0.26% of the U.S. gross domestic product - less than what the country spent building the interstate highway system from 1955 to 1980. After 2035, this investment starts to pay back. By 2050, it would be a net positive $3 trillion, plus we would have an all-new energy infrastructure.

Government can't do this alone. What government can do is establish policies - such as putting a price on carbon, higher corporate average fuel economy standards, and renewable portfolio standards - to send price signals to private industry to encourage investment. It really has to be a public-private partnership.

We laid out the STEP plan and worked out a portfolio of energy solutions for clean energy to achieve energy self-sufficiency. What is missing is a policy to engage the private sector.

I'm an entrepreneur at heart. So starting a company and tying all the pieces together once I understood the problem was a natural fit.

Q: How does your company plan to deal with competing ideas on the future of power generation?

Johnson: What's challenging right now for clean energy developers is locking in a long-term power purchase agreement when demand is low, natural gas prices are low, and there is no long-term federal policy that puts a price on carbon. So that makes it tough for renewables to compete. And they need to compete.

I think what we're looking at are total costs and the need for a level playing field. It's not quite a level playing field right now. Paul Epstein, with the Center for Health and the Global Environment at the Harvard Medical School, and colleagues wrote an interesting article that estimates that the total life cycle cost of coal is double or triple what consumers pay for this fossil-fueled electricity, if we account for the impact of thermoelectric generation on our health and environment.1

Most renewables are more expensive right now. But we see the costs continuing to decrease as the volume increases. The trend over time is a significant price decrease when the installed base doubles.

Hydro has always been a pretty cheap source of electricity. But here's the real issue: When you're dealing with hydropower, you tie up capital for four or five years getting the required permits. That's a killer, because you're not getting any return to your investors during those years. We need to streamline and remove the duplications in the permitting process to ensure that we build environmentally sensitive clean energy projects in a reasonable time frame, like one to two years in total. This would create huge ancillary benefits, such as immediate job creation and faster integration of clean, dispatchable electricity onto the grid.

Q: Where do you think is the best place to invest in hydro right now?

Johnson: You could consider taking a different approach to licensing that would make the process during both construction and generation more efficient and attractive to investors, such as thinking about licensing an entire river system instead of lock and dam by lock and dam. Right now, you could have three different developers working on three different locks and dams. They may not be working together to ensure the whole system does not experience cumulative environmental effects from powering the three locks and dams and that the three powerhouses are operated to maximize the precious river resource. Thinking about how we license them from a systems perspective instead of individual one-offs would be very helpful and I think attractive to private sector investment.

In Maine, for example, they're looking at a whole system approach to hydropower generation on the rivers.

I think there are interesting things going on in Alaska. There are some tremendous projects being planned at the state level. And there are interesting things happening on the Ohio River.

We're not looking at building new dams. We want to power existing dams that make sense for a variety of beneficial uses, such as preserving fresh water, preventing flooding and producing clean electricity.

Q: How did you go about picking your leadership team?

Johnson: In starting Enduring Energy and Enduring Hydro, I was looking for individuals who were equally passionate about the energy inheritance we leave our children and grandchildren. I was also looking for individuals whose work ethic matched that passion. Dr. Mark Handschy, my senior science advisor, and Asaf Nagler fit that bill. I knew them, and I knew they were smart, dedicated, could work hard, and were genuinely nice people. Over time, we were fortunate to add Mark Garner, former president and chief executive officer of Voith Hydro, and the winner of the National Hydropower Association 2012 Kenneth Henwood Award, as well as John Collins, former chief financial officer of Constellation Energy (now Exelon) and Ginger Lew, former senior advisor to Larry Summers, the president's economic advisor, National Economic Council.

Enduring Hydro LLC has broken ground on a 6-MW hydroelectric facility at Mahoning Creek Dam in Western Pennsylvania and expects the powerhouse to be operational by the end of the year.
Enduring Hydro LLC has broken ground on a 6-MW hydroelectric facility at Mahoning Creek Dam in Western Pennsylvania and expects the powerhouse to be operational by the end of the year.

Q: You have a personal connection to hydro. Please describe that.

Johnson: My granddad was head of engineering for George Westinghouse; he was in hydropower during the early years. He helped electrify America. My dad, wanting to follow in his father's footsteps, decided to become an electrical engineer. He also worked for Westinghouse, for 37 years.

I decided to try to figure out what they both loved about engineering, so I became an electrical engineer and found the way home to hydropower.

Q: What can Enduring Energy and Enduring Hydro offer their clients they won't get from another company?

Johnson: One of the things we hear from our clients is that we have really deep knowledge of the government, regulatory, finance and technical side of the business, which gives us a holistic perspective of the industry. As I mentioned earlier, Mark Garner, was the CEO of Voith Hydro and worked for Voith Hydro for 22 years. We also enjoy working with other companies, whether they are "competitors" or collaborators - there is so much we all need to do to achieve the 14,000 MW of incremental hydropower by 2035. I hope we all succeed wildly.

We also have deep domain knowledge of how a utility works, as well as a good understanding of how the energy industry works. Our CFO, John Collins, has dealt with a variety of issues with all sorts of companies, including mergers and acquisitions. I also think a lot of our clients have been really happy with our out-of-the-box thinking.

Finally, we have access to capital to now build projects. For example, we acquired the 6-MW Mahoning Creek hydroelectric project, to be developed at an existing dam in western Pennsylvania, in August 2012. We have now broken ground on the new powerhouse and expect it to be operational by the end of the year.

Q: Where do you see these two companies in five years?

Johnson: I am now focusing exclusively on hydropower through my role as chairman and CEO of Enduring Hydro. In five to seven years, we want to own and operate 800 to 1,000 MW of clean, dispatchable electricity, and the majority of it will be hydro.

It's a big goal, but we might as well set a big goal. If our nation's goal is 14,000 MW by 2035 and in five to seven years we can do 1,000 MW, we will move the needle 7% while helping others bring more hydropower on board as well. That would be significant.

I have found that the hydropower community is a wonderful community. Everyone is committed to building great projects, maintaining great projects and upgrading great projects. It's a really collegial community, and I'm just really happy that we are a part of it.

I hope our company can be a catalyst to help everyone move through some of the issues facing hydro development in the U.S. We want to be the grease to help people get projects done. The attitude I want to bring is to refuse to lose in getting these projects done, because the country needs this. Whatever it takes, we just want to get projects done.

Note

1Epstein, Paul R., et al, "Full Cost Accounting for the Life Cycle of Coal," Annals of the New York Academy of Sciences, Volume 1219, February 2011, pages 73-98.


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