By Teresa Hansen
Editor-in-Chief
I recently attended a conference in Washington, D.C. called TransForum East. It was organized by PennWell through one of its latest acquisitions, TransmissionHub, a research, analysis and news portal. As the name implies, the conference deals with electricity transmission, but this year the low price of natural gas and how it is affecting the electric power sector was a hot topic.
Kent Knutson, TransmissionHub's director of data strategy and content, said transmission investment in the U.S. is growing. During the first nine months of 2013, nearly $6.7 billion was invested in transmission projects, up considerably from the $5.6 billion spent in all of last year.
Knutson expects continued growth through 2015. Most activity is in 345 kV projects being driven by Texas competitive renewable energy zone (CREZ) and Western Interconnection projects. A fair amount of activity is also occurring in the Midwest and PJM independent system operators and the Northeast Power Coordinating Council territories.
As in other areas of the electric power industry, uncertainty is prevalent in the transmission sector. Changing technologies, cyber and physical security threats, regulations, siting issues and customer expectations are to blame for much of that uncertainty.
Cheap gas becomes a transmission driver
The changing power generation mix, however, is perhaps the biggest culprit. Electricity generated by wind and solar energy is rapidly being added into the mix. Coal plants are being retired because they can't meet EPA regulations. Cheap natural gas is resulting in a build-out of new gas-fired combined-cycle generation to replace retired coal plants and back up intermittent renewable energy.
New transmission is needed to connect renewable energy with load centers, plus load forecasting and balancing technologies must be added to manage this intermittent supply. New gas-fired generation being built in areas with inadequate transmission capacity is also driving new transmission construction. In addition, in some areas, especially the northeast, gas-fired plants are being built in areas with constrained gas pipeline capacity.
Transmission operators are concerned that these plants, which they count on for supply, could fall off the grid if pipeline capacity is used for other demands such as home heating. Because many new gas-fired plants are owned by independent investors and merchant generators, differing opinions and uncertainty exist about who will pay for needed electric transmission infrastructure as well as gas pipeline infrastructure.
Will FERC address uncertainty?
Many look to the Federal Energy Regulatory Commission (FERC) for clarity on these issues. FERC Commissioner Philip Moeller, who spoke at TransForum, acknowledged that transmission owners and operators face many hurdles. Moeller said FERC knows the lack of a federal policy allowing transmission owners to build across state lines is a problem, but he doesn't foresee a federal law changing siting issues for interstate transmission lines in the near term.
He also said that uncertainty surrounding return on equity (ROE) exists. He said FERC has created much of this uncertainty, but his only words of encouragement came when he said ROE is a "live" issue for FERC.
Low- to moderate-priced natural gas, which Moeller said will stick around for some time, will continue to drive gas-fired generation and transmission growth. Better coordination between gas suppliers and electricity generators must be addressed, he said.
Longer-term issues, he said, such as who pays for the gas infrastructure to secure supply to generators, are more vexing. A big part of the solution involves the two industries learning more about how the other one works, he said.
Even with the uncertainty, Moeller said he is "bullish" on transmission and "it's an exciting time" in the transmission industry. "If the issues were easy, someone else would have already solved them. You need to stay active and involved," he said.
Showing posts with label natural gas. Show all posts
Showing posts with label natural gas. Show all posts
Wednesday, November 6, 2013
Friday, August 30, 2013
China thinks big on power generation, delivery
The world's second-biggest economy, China, is setting its sights on a massive expansion of its electric power sector. The country is growing increasingly energy hungry as its already massive manufacturing sector expands — and the smog haze around populated areas grow indisputably denser.
Some power sector expansion scenarios laid out by Bloomberg New Energy Finance could address both power reliability and environmental concerns, however at least one scenario would require 88 GW in new power generation capacity every year from now until 2030.
That would mean a build-out equal to the entire generation capacity of the United Kingdom every single year. Still, if any country can accomplish this, it's probably China.
China, which by the way is already the world's largest single source of carbon dioxide emissions and the most powerful generator of electric power in the world, could add more than 1,500 GW of new power generation in the next two decades, according to Bloomberg's surveys.
In a scenario called "The New Normal," a reasonably progressive yet still conservative estimate of what China might do with its energy sector, this would require an investment just shy of $4 trillion.
At the same time, though, cuts in overall emissions could still be achieved as soon as 2027 through the adoption and integration of more renewable energy capacity and the phase-out of coal-fired power. Large hydropower would constitute more than half of new capacity. China is already home to the world's biggest and most powerful hydropower projects, and even more are being planned.
The New Normal plan also calls for an expansion of China's natural gas-fired fleet that would push down coal-fired generation from 67 percent of China's energy mix to 44 percent by 2030. Coal-fired power would still expand in this scenario by nearly 40 GW per year, it should be noted.
Separate from this planned massive power generation build-out, another way China is thinking big is its anticipated $100 billion investment in ultra high-voltage transmission lines (Read more about that here). The State Grid Corp. of China, which according to some estimates is the world's biggest utility, has either approved or is already building 20 such transmission projects.
These 20 high-voltage lines will form a massive network that will link up the densely populated and heavily industrialized southern and eastern parts of China with the west, where the country's hydropower potential is already better realized than just about anywhere else in the Eastern Hemisphere. China has already built the world's most massive and powerful dams in its eastern provinces, including Three Gorges, which at 22,500 MW generates as much electricity as 15 nuclear power plants.
Linking up the country's east and west with high-voltage power transmission is a smart way for China to make effective use of low- or no-carbon generation. Over the long term, this will help China's overall power portfolio become less polluting. Focusing on a well-built power grid with plenty of storm-hardening countermeasures and redundancies will prevent a scenario like we see in Brazil, which also uses massive dams to power far-flung population centers, but which suffers from regular outages when transmission lines are damaged or cut off.
As I write this, Brazilian authorities are working to restore power to eight states and tens of millions of people because a fire in northeast Brazil damaged transmission lines that link huge hydro assets from cities (See that story here). As China grows, it would do well to keep an eye on Brazil and remember what happens when you build out your cities and power plants, but neglect your transmission infrastructure.
Some power sector expansion scenarios laid out by Bloomberg New Energy Finance could address both power reliability and environmental concerns, however at least one scenario would require 88 GW in new power generation capacity every year from now until 2030.
That would mean a build-out equal to the entire generation capacity of the United Kingdom every single year. Still, if any country can accomplish this, it's probably China.
China, which by the way is already the world's largest single source of carbon dioxide emissions and the most powerful generator of electric power in the world, could add more than 1,500 GW of new power generation in the next two decades, according to Bloomberg's surveys.
In a scenario called "The New Normal," a reasonably progressive yet still conservative estimate of what China might do with its energy sector, this would require an investment just shy of $4 trillion.
At the same time, though, cuts in overall emissions could still be achieved as soon as 2027 through the adoption and integration of more renewable energy capacity and the phase-out of coal-fired power. Large hydropower would constitute more than half of new capacity. China is already home to the world's biggest and most powerful hydropower projects, and even more are being planned.
The New Normal plan also calls for an expansion of China's natural gas-fired fleet that would push down coal-fired generation from 67 percent of China's energy mix to 44 percent by 2030. Coal-fired power would still expand in this scenario by nearly 40 GW per year, it should be noted.
Separate from this planned massive power generation build-out, another way China is thinking big is its anticipated $100 billion investment in ultra high-voltage transmission lines (Read more about that here). The State Grid Corp. of China, which according to some estimates is the world's biggest utility, has either approved or is already building 20 such transmission projects.
These 20 high-voltage lines will form a massive network that will link up the densely populated and heavily industrialized southern and eastern parts of China with the west, where the country's hydropower potential is already better realized than just about anywhere else in the Eastern Hemisphere. China has already built the world's most massive and powerful dams in its eastern provinces, including Three Gorges, which at 22,500 MW generates as much electricity as 15 nuclear power plants.
Linking up the country's east and west with high-voltage power transmission is a smart way for China to make effective use of low- or no-carbon generation. Over the long term, this will help China's overall power portfolio become less polluting. Focusing on a well-built power grid with plenty of storm-hardening countermeasures and redundancies will prevent a scenario like we see in Brazil, which also uses massive dams to power far-flung population centers, but which suffers from regular outages when transmission lines are damaged or cut off.
As I write this, Brazilian authorities are working to restore power to eight states and tens of millions of people because a fire in northeast Brazil damaged transmission lines that link huge hydro assets from cities (See that story here). As China grows, it would do well to keep an eye on Brazil and remember what happens when you build out your cities and power plants, but neglect your transmission infrastructure.
Tuesday, March 5, 2013
10 facts about Obama's new head of the DOE
After a lot of speculation, the official announcement has been made. Ernest Moniz will be President Barack Obama's main man at the Department of Energy pending approval by the Senate. Here are 10 things worth knowing about Moniz, who will run the DOE during Obama's second term.
1. Moniz is a nuclear physicist by training, and an advocate for the safe use of nuclear power as an energy source. In the aftermath of the Fukushima nuclear disaster, Moniz said it would be a mistake not to pursue a nuclear friendly energy policy in the U.S.
2. Obama is the second president Moniz has worked for. Moniz was President Bill Clinton's undersecretary of the DOE from 1997 to 2001. He also served as an associate director for science in Clinton's Office of Science and Technology Policy.
3. Moniz has a "wait and see" approach to new techniques in natural gas extraction, like "frakking." He says the risks of such techniques are challenging, but manageable. He has also referred to natural gas as a "bridge" fuel that can take the country to a future low-carbon energy portfolio (i.e. Away from coal).
4. Among the issues Moniz has handled at the DOE are: Oversight of science and energy policy, nuclear weapons proliferation and stockpile stewardship, nuclear fuel cycles (including waste disposal) and solar energy in a low-carbon world.
5. In a Washington Post story about carbon capture and storage, Moniz was quoted as saying in 2009 that there is no credible pathway to meeting greenhouse gas reduction targets without cutting carbon dioxide from existing coal-fired power plants.
6. As director of MIT's Energy Initiative, Moniz has some financial ties to the energy industry via the research group's $125 million in donations from the oil and gas industry since 2006, according to reports. Founding members of the organization include BP, Saudi Aramco and Shell.
7. Unlike his predecessor Steven Chu, Moniz will probably have less funding to work with. Chu's tenure at the DOE was marked by the early passage of the American Recovery and Reinvestment Act of 2009, which significantly expanded the department's operating budget.
8. Moniz's grandparents were immigrants to the U.S. who came from the Azores, an archipelago that is an autonomous region of Portugal. He grew up speaking some Portuguese.
9. Moniz serves in Chu's Blue Ribbon Commission on nuclear energy's future, which was tasked with finding new solutions for storing and disposing of nuclear waste. Moniz advocated transferring spent nuclear fuel from pools to dry casks.
10. On solar power, Moniz said he is "bullish," adding, "It just has so many features, including the fact that even though it's intermittent, at least it tends to be on when you want it." He adds, however, that fossil fuels like oil and gas will remain at the forefront of the world's energy picture for the foreseeable future.
1. Moniz is a nuclear physicist by training, and an advocate for the safe use of nuclear power as an energy source. In the aftermath of the Fukushima nuclear disaster, Moniz said it would be a mistake not to pursue a nuclear friendly energy policy in the U.S.
2. Obama is the second president Moniz has worked for. Moniz was President Bill Clinton's undersecretary of the DOE from 1997 to 2001. He also served as an associate director for science in Clinton's Office of Science and Technology Policy.
3. Moniz has a "wait and see" approach to new techniques in natural gas extraction, like "frakking." He says the risks of such techniques are challenging, but manageable. He has also referred to natural gas as a "bridge" fuel that can take the country to a future low-carbon energy portfolio (i.e. Away from coal).
4. Among the issues Moniz has handled at the DOE are: Oversight of science and energy policy, nuclear weapons proliferation and stockpile stewardship, nuclear fuel cycles (including waste disposal) and solar energy in a low-carbon world.
5. In a Washington Post story about carbon capture and storage, Moniz was quoted as saying in 2009 that there is no credible pathway to meeting greenhouse gas reduction targets without cutting carbon dioxide from existing coal-fired power plants.
6. As director of MIT's Energy Initiative, Moniz has some financial ties to the energy industry via the research group's $125 million in donations from the oil and gas industry since 2006, according to reports. Founding members of the organization include BP, Saudi Aramco and Shell.
7. Unlike his predecessor Steven Chu, Moniz will probably have less funding to work with. Chu's tenure at the DOE was marked by the early passage of the American Recovery and Reinvestment Act of 2009, which significantly expanded the department's operating budget.
8. Moniz's grandparents were immigrants to the U.S. who came from the Azores, an archipelago that is an autonomous region of Portugal. He grew up speaking some Portuguese.
9. Moniz serves in Chu's Blue Ribbon Commission on nuclear energy's future, which was tasked with finding new solutions for storing and disposing of nuclear waste. Moniz advocated transferring spent nuclear fuel from pools to dry casks.
10. On solar power, Moniz said he is "bullish," adding, "It just has so many features, including the fact that even though it's intermittent, at least it tends to be on when you want it." He adds, however, that fossil fuels like oil and gas will remain at the forefront of the world's energy picture for the foreseeable future.
Friday, January 4, 2013
Energy stats to remember
Every now and then I like to be able to raise eyebrows with an impressive, unexpected or otherwise ... well, eyebrow-raising fact about energy. The people over at OPower shared a list they compiled with me, and I wanted to pass them on to you. Maybe you'll find one or two of them worth passing on.
The increase in power generation capacity from natural gas-fired power plants in the U.S. between 2000 and 2012: More than 96 percent.
As previously predicted on this blog, the dash for gas is a trend many energy analyists expect to see continue into 2013 and beyond.
In April 2012, for the first time ever in the U.S., the amount of power generated from natural gas was equal to that generated from coal. Because of low prices and other factors, natural gas is on the rise and coal is on the decline. Even given all of that, this is a statistic I wouldn't have easily guessed.
The annual cost of charging an iPhone 5: $0.41
I'm kind of surprised that Apple doesn't talk about this. I would. Then again, when it comes to getting people to want to buy their stuff, Apple has never had a problem with that at all. But still, that's pretty impressive. You can't buy much for four dimes and a penny, so to find out that gives your iPhone a year's worth of juice for that amount is surprising.
The year that the United States will become the world's largest producer of oil: 2017
"Drill here, drill now" say the bumper stickers. Well, we actually do quite a bit of drilling here and now. So much so, in fact, that the U.S. is giving Saudi Arabia a run for its money. And America beating the Saudis at drilling oil is a bit like beating Canada at hockey. It's kind of their thing.
The consequences of this trend are obvious. The U.S. gets to brag that it is less reliant on foreign oil than ever before. This has been a goal of every president since Richard Nixon, and one it felt like we'd never make any real progress on. But we have managed already to become a net exporter of petroleum, and we did it with expanded drilling, new technology and energy efficiency.
2012's rank in the list of the warmest years ever recorded in the continental United States: No. 1
I am writing this blog from Tulsa, Oklahoma. And nobody knows this fact better than we Oklahomans. Except perhaps Texans. During the summer we were trapped in a cruel heat bubble, and we had a winter that wasn't a winter.
Me personally, I'd rather be hot than cold, and part of me enjoyed a winter that was more cool than cold, but it is creepy to see weather act this way. Especially when storm season rolls around. Watching the damaging hurricanes and hybrid "Frankenstorms" of the past year have made more people than yours truly wonder whether "once in a lifetime" weather is the new normal.
The average miles per gallon of new cars sold in the first half of 2012 in the U.S.: 23.8 MPG
Consumers rank fuel economy as the first question they ask a car salesman about, and no wonder with fuel prices being what they are. But high gas prices and consumer demand is only one factor. Government action is another. Congress passed new CAFE standards in 2007. The measures of this law are now taking effect and the average fuel economy of a car is expected to rise to 35.5 MPG by 2016.
The proportion of U.S. households that have a smart meter installed: 1 in 3
The number of smart meters deployed in the U.S. has increased fivefold in just five years. Utilities love them because they provide the two-way communication that helps them in so many different ways, and some consumers like them too because they can make billing easier and make sure they don't pay too much for the electricity they use.
By mid-decade, it's predicted that half of U.S. households will have a smart meter installed. Economists foresee that the world smart meter market could grow to $34 billion in spending from 2012 to 2020.
The number of new nuclear reactors in the U.S. that were granted licenses in 2012: 2
These were, of course, the first new licenses granted to any nuclear reactor in the U.S. since 1978. For fans of nuclear energy, this is an exciting number. Perhaps even more exciting than that is the number of new nuclear reactors currently under consideration by the Nuclear Regulatory Commission: 16 other plants across the country have applications with the NRC to build 25 new reactors.
The number of nuclear reactors that Japan has announced it will close by 2040: 50
Likewise, if you're not a fan of nuclear energy, here's a statistic that should be important to you. Japan is, by and large, getting out of the nuclear power industry when it used to be at the forefront of the science of nuclear energy. A surprising development that few would have predicted a few years back, when many were talking about a worldwide nuclear renaissance. If there is a nuclear renaissance, it doesn't look like it will be happening in Japan. It's not looking too good in Germany, Switzerland or France, either.
The percentage of energy that is wasted in the U.S. every year: 56.2 percent
That's right, the U.S. wastes more energy than it uses. Despite recent advances in the world of energy efficiency, we are still a deeply inefficient country when it comes to what we do with our energy once it's generated. Of the 97.3 quadrillion British Thermal Units of raw energy that the U.S. generates, only 41.7 were used constructively. Most of this wastage has to do with how we generate energy in the first place. Most power plants are inherently inefficient. As is our transportation sector, even though it is becoming more efficient.
Thanks again to OPower for helping gather these facts.
The increase in power generation capacity from natural gas-fired power plants in the U.S. between 2000 and 2012: More than 96 percent.
As previously predicted on this blog, the dash for gas is a trend many energy analyists expect to see continue into 2013 and beyond.
In April 2012, for the first time ever in the U.S., the amount of power generated from natural gas was equal to that generated from coal. Because of low prices and other factors, natural gas is on the rise and coal is on the decline. Even given all of that, this is a statistic I wouldn't have easily guessed.
The annual cost of charging an iPhone 5: $0.41
I'm kind of surprised that Apple doesn't talk about this. I would. Then again, when it comes to getting people to want to buy their stuff, Apple has never had a problem with that at all. But still, that's pretty impressive. You can't buy much for four dimes and a penny, so to find out that gives your iPhone a year's worth of juice for that amount is surprising.
The year that the United States will become the world's largest producer of oil: 2017
"Drill here, drill now" say the bumper stickers. Well, we actually do quite a bit of drilling here and now. So much so, in fact, that the U.S. is giving Saudi Arabia a run for its money. And America beating the Saudis at drilling oil is a bit like beating Canada at hockey. It's kind of their thing.
The consequences of this trend are obvious. The U.S. gets to brag that it is less reliant on foreign oil than ever before. This has been a goal of every president since Richard Nixon, and one it felt like we'd never make any real progress on. But we have managed already to become a net exporter of petroleum, and we did it with expanded drilling, new technology and energy efficiency.
2012's rank in the list of the warmest years ever recorded in the continental United States: No. 1
I am writing this blog from Tulsa, Oklahoma. And nobody knows this fact better than we Oklahomans. Except perhaps Texans. During the summer we were trapped in a cruel heat bubble, and we had a winter that wasn't a winter.
Me personally, I'd rather be hot than cold, and part of me enjoyed a winter that was more cool than cold, but it is creepy to see weather act this way. Especially when storm season rolls around. Watching the damaging hurricanes and hybrid "Frankenstorms" of the past year have made more people than yours truly wonder whether "once in a lifetime" weather is the new normal.
The average miles per gallon of new cars sold in the first half of 2012 in the U.S.: 23.8 MPG
Consumers rank fuel economy as the first question they ask a car salesman about, and no wonder with fuel prices being what they are. But high gas prices and consumer demand is only one factor. Government action is another. Congress passed new CAFE standards in 2007. The measures of this law are now taking effect and the average fuel economy of a car is expected to rise to 35.5 MPG by 2016.
The proportion of U.S. households that have a smart meter installed: 1 in 3
The number of smart meters deployed in the U.S. has increased fivefold in just five years. Utilities love them because they provide the two-way communication that helps them in so many different ways, and some consumers like them too because they can make billing easier and make sure they don't pay too much for the electricity they use.
By mid-decade, it's predicted that half of U.S. households will have a smart meter installed. Economists foresee that the world smart meter market could grow to $34 billion in spending from 2012 to 2020.
The number of new nuclear reactors in the U.S. that were granted licenses in 2012: 2
These were, of course, the first new licenses granted to any nuclear reactor in the U.S. since 1978. For fans of nuclear energy, this is an exciting number. Perhaps even more exciting than that is the number of new nuclear reactors currently under consideration by the Nuclear Regulatory Commission: 16 other plants across the country have applications with the NRC to build 25 new reactors.
The number of nuclear reactors that Japan has announced it will close by 2040: 50
Likewise, if you're not a fan of nuclear energy, here's a statistic that should be important to you. Japan is, by and large, getting out of the nuclear power industry when it used to be at the forefront of the science of nuclear energy. A surprising development that few would have predicted a few years back, when many were talking about a worldwide nuclear renaissance. If there is a nuclear renaissance, it doesn't look like it will be happening in Japan. It's not looking too good in Germany, Switzerland or France, either.
The percentage of energy that is wasted in the U.S. every year: 56.2 percent
That's right, the U.S. wastes more energy than it uses. Despite recent advances in the world of energy efficiency, we are still a deeply inefficient country when it comes to what we do with our energy once it's generated. Of the 97.3 quadrillion British Thermal Units of raw energy that the U.S. generates, only 41.7 were used constructively. Most of this wastage has to do with how we generate energy in the first place. Most power plants are inherently inefficient. As is our transportation sector, even though it is becoming more efficient.
Thanks again to OPower for helping gather these facts.
Monday, December 17, 2012
2013 trends for the power industry
Even if the Mayans are wrong about the world ending, there isn't much left of 2012. So before we all rush off to relatives' houses or office holiday parties, let's take some time to consider the year ahead and what it might hold for the electric utility industry.
I had the opportunity recently to ask a few quick questions to Andre Begosso, managing director of Accenture's Utilities North America strategy practice. Thanks to Andre's expertise, we can flesh out what might happen in the coming weeks and months.
Trend No. 1: The "Dash for Gas" will continue, but don't count coal out
This year, hydraulic fracking and other developments in fossil fuel extraction have tipped the scales in favor of natural gas, thus leading power companies to exploit the record low prices of natural gas-fired generation. Andre said he expects this trend to continue into 2013.
"The price of gas will continue to fluctuate and there is a reason for that," he said. "Price is driven by marginal demand, which in turn is driven mostly by the power generation sector."
Along with the Dash for Gas, another phrase that gained notoriety was the "War on Coal." Energy lobbyists and politicians from coal-producing countries have been among those who claim that the president, the EPA and Congress have it in for coal and are putting the industry at risk deliberately. For his part though, Andre said he doesn't buy this hype.
"The price of gas is the single biggest pressure on the coal sector," he said. "Worse than any regulation or legislation from the government."
Regardless of why coal is feeling the pinch, though, there will always be a need for the baseload power it provides, he said.
"Even in the best case scenarios, we don't have enough gas to completely replace coal," he said. "Not only that, but we have some upcoming technologies currently under development that will allow us to use less coal. Coal will never go away."
Trend No. 2: Utilities get back to their bread and butter
With the American Recovery and Reinvestment Act funding spent and Congress not in a spending mood, I wondered where smart grid pilot programs and smart meter rollouts were going to get their funding. "The ratepayers," predicts Andre.
"In terms of the smart grid, there was a wave of construction, and now people are getting better at applying the technology. We will continue to learn more about how to apply it and how to keep the technology viable," he said.
Some of the more exotic technologies, such as energy storage, that have yet to be firmly proven in the field, utilities will take a rain check on — waiting to see how the technologies evolve over time.
"Utilities will continue to invest in their bread and butter technologies, like AMI. There is no reason for them not to invest in those," he said.
Trend No. 3: Has renewable energy deployment hit a peak?
FERC announced what I thought were some surprising numbers about renewable generation. Biomass, geothermal, solar, wind and hydropower, taken together, accounted for more than 41 percent of new generation put online in the U.S. in 2012.
This is thanks to a variety of factors, Andre said. Government support, in the form of the production tax credit, is one factor, as are state-level renewable portfolio standards.
"A lot of states have a looming 2015 deadline to meet their portfolio standards. Michigan is one of them. So they needed to meet those standards," he said.
In the absence of some major advance in energy storage, Andre said, he expects that renewable energy installation will probably start to slow as its shortcomings become more apparent to utilities and power companies.
"I would not expect these trends to continue because of the tremendous limitation that renewable technologies have. You cannot break the laws of physics or the laws of chemistry. The wind doesn't blow all the time and it never will, and the sun doesn't always shine and it never will," he said.
Trend No. 4: Energy back on the agenda
In my last blog post, I speculated about what it might take to get energy policy back on the agenda. When I asked about this, Andre said energy already is back on the agenda.
"Over the next 3 years, over $220 billion in new infrastructure will be built. But the problem with infrastructure is Rome wasn't built in a day. It takes time," he said.
This new wave of infrastructure upgrades will require a level of patience and understanding on the part of ratepayers that Andre wonders whether the average person is capable of. During Hurricane Sandy, for example, Con Edison had one of the most sophisticated electric grids available — yet it still failed, and people wonder why.
"As much as people hate outages, I don't think they understand them," he said. "If we had to build everything to withstand every possible disaster that could happen, it would never be built. It would be too expensive."
As far as utilities are concerned in this, Andre compares adopting new infrastructure improvements to how consumers usually approach the release of flashy new electronic gizmos.
"Remember when BluRay players were $400? Some people did pay for them, but the average Joe looked at it and said, 'Well, I can still watch movies on my old DVD player.' The infrastructure problem isn't much different from that."
Trend No 5: Growth opportunities will come from new start-ups
Maybe one of the biggest long-term changes the utility industry has ever seen is the reversal of the status quo of energy use. Energy companies are realizing they have a vested interest in getting customers to use less of their product, and this trend in turn is leading to a market for all kinds of consumer gadgets that will help people use less energy.
"The regulatory model of the U.S. was built around capital. The underlying assumption was we'd always have growth and we'd always consume more energy," he said. "What we may see in the future is that assumption might not be true... If you have a good understanding of the way the market works, you will be successful."
Small start-up companies that have a good idea and a way to market it might make a bigger splash in the energy sector with it comes to growth than the older, more established players.
"I just got a new smart thermostat called the Nest, and it's one of the coolest things I've ever bought," he said. "I installed it myself and I'm not a very handy person."
My thanks to Andre Begosso for his help with this post. Andre is a managing director in the Accenture management consulting practice and is focused on the resources operating group. He has more than seventeen years of experience in the utility and energy industries and advises clients in the alternative energy, power generation and oil and gas sectors. Andre has a B.S. in industrial engineering from the university of Sao Paulo, Brazil and an MBA from the Ross School of Business at the University of Michigan.
I had the opportunity recently to ask a few quick questions to Andre Begosso, managing director of Accenture's Utilities North America strategy practice. Thanks to Andre's expertise, we can flesh out what might happen in the coming weeks and months.
Trend No. 1: The "Dash for Gas" will continue, but don't count coal out
This year, hydraulic fracking and other developments in fossil fuel extraction have tipped the scales in favor of natural gas, thus leading power companies to exploit the record low prices of natural gas-fired generation. Andre said he expects this trend to continue into 2013.
"The price of gas will continue to fluctuate and there is a reason for that," he said. "Price is driven by marginal demand, which in turn is driven mostly by the power generation sector."
Along with the Dash for Gas, another phrase that gained notoriety was the "War on Coal." Energy lobbyists and politicians from coal-producing countries have been among those who claim that the president, the EPA and Congress have it in for coal and are putting the industry at risk deliberately. For his part though, Andre said he doesn't buy this hype.
"The price of gas is the single biggest pressure on the coal sector," he said. "Worse than any regulation or legislation from the government."
Regardless of why coal is feeling the pinch, though, there will always be a need for the baseload power it provides, he said.
"Even in the best case scenarios, we don't have enough gas to completely replace coal," he said. "Not only that, but we have some upcoming technologies currently under development that will allow us to use less coal. Coal will never go away."
Trend No. 2: Utilities get back to their bread and butter
With the American Recovery and Reinvestment Act funding spent and Congress not in a spending mood, I wondered where smart grid pilot programs and smart meter rollouts were going to get their funding. "The ratepayers," predicts Andre.
"In terms of the smart grid, there was a wave of construction, and now people are getting better at applying the technology. We will continue to learn more about how to apply it and how to keep the technology viable," he said.
Some of the more exotic technologies, such as energy storage, that have yet to be firmly proven in the field, utilities will take a rain check on — waiting to see how the technologies evolve over time.
"Utilities will continue to invest in their bread and butter technologies, like AMI. There is no reason for them not to invest in those," he said.
Trend No. 3: Has renewable energy deployment hit a peak?
FERC announced what I thought were some surprising numbers about renewable generation. Biomass, geothermal, solar, wind and hydropower, taken together, accounted for more than 41 percent of new generation put online in the U.S. in 2012.
This is thanks to a variety of factors, Andre said. Government support, in the form of the production tax credit, is one factor, as are state-level renewable portfolio standards.
"A lot of states have a looming 2015 deadline to meet their portfolio standards. Michigan is one of them. So they needed to meet those standards," he said.
In the absence of some major advance in energy storage, Andre said, he expects that renewable energy installation will probably start to slow as its shortcomings become more apparent to utilities and power companies.
"I would not expect these trends to continue because of the tremendous limitation that renewable technologies have. You cannot break the laws of physics or the laws of chemistry. The wind doesn't blow all the time and it never will, and the sun doesn't always shine and it never will," he said.
Trend No. 4: Energy back on the agenda
In my last blog post, I speculated about what it might take to get energy policy back on the agenda. When I asked about this, Andre said energy already is back on the agenda.
"Over the next 3 years, over $220 billion in new infrastructure will be built. But the problem with infrastructure is Rome wasn't built in a day. It takes time," he said.
This new wave of infrastructure upgrades will require a level of patience and understanding on the part of ratepayers that Andre wonders whether the average person is capable of. During Hurricane Sandy, for example, Con Edison had one of the most sophisticated electric grids available — yet it still failed, and people wonder why.
"As much as people hate outages, I don't think they understand them," he said. "If we had to build everything to withstand every possible disaster that could happen, it would never be built. It would be too expensive."
As far as utilities are concerned in this, Andre compares adopting new infrastructure improvements to how consumers usually approach the release of flashy new electronic gizmos.
"Remember when BluRay players were $400? Some people did pay for them, but the average Joe looked at it and said, 'Well, I can still watch movies on my old DVD player.' The infrastructure problem isn't much different from that."
Trend No 5: Growth opportunities will come from new start-ups
Maybe one of the biggest long-term changes the utility industry has ever seen is the reversal of the status quo of energy use. Energy companies are realizing they have a vested interest in getting customers to use less of their product, and this trend in turn is leading to a market for all kinds of consumer gadgets that will help people use less energy.
"The regulatory model of the U.S. was built around capital. The underlying assumption was we'd always have growth and we'd always consume more energy," he said. "What we may see in the future is that assumption might not be true... If you have a good understanding of the way the market works, you will be successful."
Small start-up companies that have a good idea and a way to market it might make a bigger splash in the energy sector with it comes to growth than the older, more established players.
"I just got a new smart thermostat called the Nest, and it's one of the coolest things I've ever bought," he said. "I installed it myself and I'm not a very handy person."
My thanks to Andre Begosso for his help with this post. Andre is a managing director in the Accenture management consulting practice and is focused on the resources operating group. He has more than seventeen years of experience in the utility and energy industries and advises clients in the alternative energy, power generation and oil and gas sectors. Andre has a B.S. in industrial engineering from the university of Sao Paulo, Brazil and an MBA from the Ross School of Business at the University of Michigan.
Thursday, October 18, 2012
Obama, Romney talk about energy, with energy
President Barack Obama and former Gov. Mitt Romney faced off at New York
State's Hofstra University October 17 with polls tightening and each
man eager to make their appeals to the country's remaining undecided
voters still available in the 2012 election's last few weeks.
While the first presidential debate saw little mention of energy as an issue — with Romney briefly mentioning government subsidies to green energy firms, like the bankrupt Solyndra — this debate had the candidates talking energy both frequently and early on in the proceedings.
Last night, a member of the town hall audience broached the topic of energy costs with a question about gas prices and plans to lower them. He said Obama's secretary of Energy, Stephen Chu, has said it is not the policy of the DOE to help lower gas prices, and asked Obama directly if he agreed. Obama responded to this question by talking about the production of oil, coal and natural gas.
The president said that while production of fossil fuels is up, the country must also invest in wind power, solar power and biofuels, as well as make vehicles that burn less gas.
On natural gas, Obama said, "We've got potentially 600,000 jobs and 100 years worth of energy right beneath our feet with natural gas. And we can do it in an environmentally friendly way, but we have got to continue to figure out how we can get efficient energy because that is how we can reduce demand and that is what's going to keep gas prices lower."
Both candidates tried to claim the mantle of an "all of the above" energy policy, which has become a bit of a catchphrase for both parties of late. Obama said Romney's plan is not all-of-the-above because he would let "oil companies write the energy policies."
"So he's got the oil and gas part, but not the clean energy part," Obama said. "China and Germany are making these clean energy investments, and I'm not going to cede those jobs of the future to those countries. I expect those new energy sources to be built right here in the United States."
"I want to make sure we use our oil, our coal, our gas, our nuclear, our renewables. I believe very much in our renewable capabilities. Ethanol, wind, solar will all be an important part of our energy mix," Romney said. "But what we don't need is to have the president keeping us from taking advantage of oil, coal and gas."
Building a coal-fired power plant in specific, Romney said, is nearly impossible to do under current regulations — hinting that this is by the design of Obama's EPA.
Obama countered this charge by saying that as governor of Massachusetts, Romney "took great pride" in shutting down a coal plant.
"You stood in front of a coal plant and pointed at it and said, 'This plant kills,'" Obama said.
According to the Tampa Bay Times' PolitiFact, the plant Obama referred to was the Salem Harbor Power Station, which was then owned by Pacific Gas & Electric. The four-unit coal-burning plant had been ranked as one of the "Filthy Five" plants by an environmental group and as the newly elected governor, Romney decided not to support a plan to grant the plant an extension to comply with emissions rules. At a videotaped press conference, Romney said, "I will not create jobs or hold jobs that kill people, and that plant — that plant kills people."
Obama went on to say that his administration invested in "clean coal" technology.
CNN reporter Candy Crowley, who served as moderator, asked whether the price of gas be meaningfully addressed by an American president at all, or are per-gallon prices hovering around $4 the "new normal," Crowley wanted to know.
The subject went back to oil production, where Romney said production on public land had dropped by 14 percent this year, which sparked a testy exchange and back-and-forth denials.
Apparently both men decided that the sure-fire winner was talking about gas prices — with Obama defending his record and talking about production, and Romney in turn saying the strategy hasn't worked because of the price you pay at the pump.
While there was occasional name-checking of wind or solar, this debate's energy talk was almost limited to fossil fuels, though. The energy we feed into the grid by burning fossil fuels wasn't talked about much by either candidate, and nobody said a word about energy infrastructure, grid cybersecurity or the smart grid.
It wasn't too much to hope for either. I have heard this president say the words "smart grid" before, even though many voters might not yet know what it means. Romney, I'm sure, is aware of these technologies too, having helped manage the finances of high-tech companies in his private asset management days.
I wish "energy" in the context of a political debate could occasionally mean something more than "gas prices" though.
It was a town hall style debate, and time was limited however. According to at least one report, Crowley had a question on climate change in her pocket that she never got around to asking. That could have potentially yielded some thought-provoking statements. Maybe if there had been a bit less crosstalk on the floor, she could have gotten to it.
There is still one more debate, but it will primarily concern foreign policy. This debate, then, was probably the last time energy policy could conceivably have been brought up in any great detail — at least with both the president and the governor in the same room.
If you want to know where these candidates stand on energy issues, it looks like you're going to have to do a little digging.
For more on Romney and Obama's respective energy plans, see Jennifer Van Burkleo's story from the September-October issue of Electric Light & Power magazine.
And please, don't forget to vote — Nov. 6, or earlier if your state allows it.
While the first presidential debate saw little mention of energy as an issue — with Romney briefly mentioning government subsidies to green energy firms, like the bankrupt Solyndra — this debate had the candidates talking energy both frequently and early on in the proceedings.
Last night, a member of the town hall audience broached the topic of energy costs with a question about gas prices and plans to lower them. He said Obama's secretary of Energy, Stephen Chu, has said it is not the policy of the DOE to help lower gas prices, and asked Obama directly if he agreed. Obama responded to this question by talking about the production of oil, coal and natural gas.
The president said that while production of fossil fuels is up, the country must also invest in wind power, solar power and biofuels, as well as make vehicles that burn less gas.
On natural gas, Obama said, "We've got potentially 600,000 jobs and 100 years worth of energy right beneath our feet with natural gas. And we can do it in an environmentally friendly way, but we have got to continue to figure out how we can get efficient energy because that is how we can reduce demand and that is what's going to keep gas prices lower."
Both candidates tried to claim the mantle of an "all of the above" energy policy, which has become a bit of a catchphrase for both parties of late. Obama said Romney's plan is not all-of-the-above because he would let "oil companies write the energy policies."
"So he's got the oil and gas part, but not the clean energy part," Obama said. "China and Germany are making these clean energy investments, and I'm not going to cede those jobs of the future to those countries. I expect those new energy sources to be built right here in the United States."
"I want to make sure we use our oil, our coal, our gas, our nuclear, our renewables. I believe very much in our renewable capabilities. Ethanol, wind, solar will all be an important part of our energy mix," Romney said. "But what we don't need is to have the president keeping us from taking advantage of oil, coal and gas."
Building a coal-fired power plant in specific, Romney said, is nearly impossible to do under current regulations — hinting that this is by the design of Obama's EPA.
Obama countered this charge by saying that as governor of Massachusetts, Romney "took great pride" in shutting down a coal plant.
"You stood in front of a coal plant and pointed at it and said, 'This plant kills,'" Obama said.
According to the Tampa Bay Times' PolitiFact, the plant Obama referred to was the Salem Harbor Power Station, which was then owned by Pacific Gas & Electric. The four-unit coal-burning plant had been ranked as one of the "Filthy Five" plants by an environmental group and as the newly elected governor, Romney decided not to support a plan to grant the plant an extension to comply with emissions rules. At a videotaped press conference, Romney said, "I will not create jobs or hold jobs that kill people, and that plant — that plant kills people."
Obama went on to say that his administration invested in "clean coal" technology.
CNN reporter Candy Crowley, who served as moderator, asked whether the price of gas be meaningfully addressed by an American president at all, or are per-gallon prices hovering around $4 the "new normal," Crowley wanted to know.
The subject went back to oil production, where Romney said production on public land had dropped by 14 percent this year, which sparked a testy exchange and back-and-forth denials.
Apparently both men decided that the sure-fire winner was talking about gas prices — with Obama defending his record and talking about production, and Romney in turn saying the strategy hasn't worked because of the price you pay at the pump.
While there was occasional name-checking of wind or solar, this debate's energy talk was almost limited to fossil fuels, though. The energy we feed into the grid by burning fossil fuels wasn't talked about much by either candidate, and nobody said a word about energy infrastructure, grid cybersecurity or the smart grid.
It wasn't too much to hope for either. I have heard this president say the words "smart grid" before, even though many voters might not yet know what it means. Romney, I'm sure, is aware of these technologies too, having helped manage the finances of high-tech companies in his private asset management days.
I wish "energy" in the context of a political debate could occasionally mean something more than "gas prices" though.
It was a town hall style debate, and time was limited however. According to at least one report, Crowley had a question on climate change in her pocket that she never got around to asking. That could have potentially yielded some thought-provoking statements. Maybe if there had been a bit less crosstalk on the floor, she could have gotten to it.
There is still one more debate, but it will primarily concern foreign policy. This debate, then, was probably the last time energy policy could conceivably have been brought up in any great detail — at least with both the president and the governor in the same room.
If you want to know where these candidates stand on energy issues, it looks like you're going to have to do a little digging.
For more on Romney and Obama's respective energy plans, see Jennifer Van Burkleo's story from the September-October issue of Electric Light & Power magazine.
And please, don't forget to vote — Nov. 6, or earlier if your state allows it.
Monday, April 30, 2012
Why is coal in a slump — really?
By Jeff Postelwait
Online Editor
Everyone knows that with enough time and pressure, coal can turn into diamonds. What will become of the coal industry with all the pressure it is currently under, nobody can say.
The Wall Street Journal took a look at two of the top three coal producers, Arch Coal and Alpha Natural Resources, both of which are experiencing lower demand and falling profits. Peabody Energy, another top coal miner, predicted that demand for coal could drop by as much as 10 percent this year. But why?
Given the fact that everyone has their own politics concerning using coal to make power, it's tempting to point the finger at either EPA regulations or some draconian piece of legislation that came from Congress, but I think blaming any one culprit for this trend is short sighted.
One factor the Journal neglects to get into, for example, is the other fossil fuel we use for energy. Natural gas recently hit a 10-year low in demand, some estimates have it. We're sitting on massive new reserves of the stuff because of new extraction techniques, and so many utilities would much rather build a natural-gas fired unit than a coal unit right now.
You could well argue that natural gas, being a finite resource, is also subject to price swings back and forth, but based on all the generation news I handle every day, I'm definitely seeing a big trend toward natural gas to the detriment of other forms of generation.
To explore another possible explanation for this problem, just open a window. It's beautiful out, and it has been for several financial quarters. The almost freakishly warm winter that the U.S. experienced had people eating up less energy — from coal or from any other source. While the EPA has been flexing its regulatory muscles in the direction of coal power lately, you can hardly blame the weather on government bureaucrats.
To be fair, we are seeing quite a few new and proposed regulations that appear to have the coal industry in their sights, whether you'd call it intentional or not. There's the proposed Clean Air Act standard for carbon dioxide pollution for new power plants. There's the Mercury and Air Toxics Standards rule issued in February, which could require coal plants to retrofit and reduce emissions of arsenic, acid gases, nickel, cyanide and other toxins. And finally there's the Cross-State Air Pollution Rule from earlier in 2012.
When the new carbon standards were proposed, more than a few were saying that this was regulation meant to kill coal for good. But at that time, the Energy Information Administration listed only a single coal-fired unit in the pipeline to be built. So if there is a piece of regulation out there threatening to kill coal, this one wasn't it.
If coal is dying off — still an alarmist thing to say for this multi-billion dollar a year industry — there isn't a single factor you can point to if you're looking for something to blame. The entire energy industry is changing, just as surely as the customers it serves are changing their minds and thinking more about how energy is produced. So while these may be challenging times, there is still time to make changes.
If these trends prove irreversible and it becomes impossible to sell coal in the same country where it is mined, then the U.S. coal industry needs to develop new markets. I can think of nowhere better to look than at China and India, the former of which is about to become the world's most coal-hungry nation. China generates nearly 70 percent of its energy from coal, but only has about 13 percent of the world's reserves. That's just one country that has "potential customer" written all over it.
Online Editor
Everyone knows that with enough time and pressure, coal can turn into diamonds. What will become of the coal industry with all the pressure it is currently under, nobody can say.
The Wall Street Journal took a look at two of the top three coal producers, Arch Coal and Alpha Natural Resources, both of which are experiencing lower demand and falling profits. Peabody Energy, another top coal miner, predicted that demand for coal could drop by as much as 10 percent this year. But why?
Given the fact that everyone has their own politics concerning using coal to make power, it's tempting to point the finger at either EPA regulations or some draconian piece of legislation that came from Congress, but I think blaming any one culprit for this trend is short sighted.
One factor the Journal neglects to get into, for example, is the other fossil fuel we use for energy. Natural gas recently hit a 10-year low in demand, some estimates have it. We're sitting on massive new reserves of the stuff because of new extraction techniques, and so many utilities would much rather build a natural-gas fired unit than a coal unit right now.
You could well argue that natural gas, being a finite resource, is also subject to price swings back and forth, but based on all the generation news I handle every day, I'm definitely seeing a big trend toward natural gas to the detriment of other forms of generation.
To explore another possible explanation for this problem, just open a window. It's beautiful out, and it has been for several financial quarters. The almost freakishly warm winter that the U.S. experienced had people eating up less energy — from coal or from any other source. While the EPA has been flexing its regulatory muscles in the direction of coal power lately, you can hardly blame the weather on government bureaucrats.
To be fair, we are seeing quite a few new and proposed regulations that appear to have the coal industry in their sights, whether you'd call it intentional or not. There's the proposed Clean Air Act standard for carbon dioxide pollution for new power plants. There's the Mercury and Air Toxics Standards rule issued in February, which could require coal plants to retrofit and reduce emissions of arsenic, acid gases, nickel, cyanide and other toxins. And finally there's the Cross-State Air Pollution Rule from earlier in 2012.
When the new carbon standards were proposed, more than a few were saying that this was regulation meant to kill coal for good. But at that time, the Energy Information Administration listed only a single coal-fired unit in the pipeline to be built. So if there is a piece of regulation out there threatening to kill coal, this one wasn't it.
If coal is dying off — still an alarmist thing to say for this multi-billion dollar a year industry — there isn't a single factor you can point to if you're looking for something to blame. The entire energy industry is changing, just as surely as the customers it serves are changing their minds and thinking more about how energy is produced. So while these may be challenging times, there is still time to make changes.
If these trends prove irreversible and it becomes impossible to sell coal in the same country where it is mined, then the U.S. coal industry needs to develop new markets. I can think of nowhere better to look than at China and India, the former of which is about to become the world's most coal-hungry nation. China generates nearly 70 percent of its energy from coal, but only has about 13 percent of the world's reserves. That's just one country that has "potential customer" written all over it.
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