In today’s new green energy economy, utilities must seek ways to meet ever-growing electricity demand, reduce the impact of power generation on the environment, manage fuel costs and curb the need to build additional infrastructure. Energy efficiency is a vital component in managing these demands and now more than ever is becoming a cornerstone in utility resource planning.

So, while energy efficiency used to be a “nice to have” social program, it is turning into a fundamental strategy for utilities to meet changing regulatory requirements and cost challenges. While there are a number of hurdles to truly benefitting from energy efficiency and other demand response programs (i.e. alternative cost recovery mechanisms due to decreased usage), a basic barrier exists between many utilities and their customers in communicating the importance of reduced usage and the best ways to do it. Customers have to buy into energy efficiency – and it falls on utilities in large part to communicate this message.

A couple of very successful initiatives are happening in Canada at the moment – EnWin Utilities of Windsor, ON has implemented a Green Suites program for its hotel customers (currently in the pilot stage). Its focus is educating the industry on conservation and offering incentives to upgrade facilities. The same utility has a highly successful Great Refrigerator Round-up program for its residential customer base – EnWin is picking up customers’ old fridges and recycling them. This gives customers added incentive to buy new, more energy efficient models.

In another more government centered example also from Canada, New Brunswick has joined with the Conservation Council of New Brunswick (an environmental NGO) and Rogers TV (large telecom within Canada) to bring a new TV series to help homeowners save money by learning how to make their homes more energy efficient and reduce greenhouse gas emissions. This six part series aimed at the average New Brunswick Homeowner and energy ratepayer looking for information and guidance on how to decrease energy use by making improvements to their homes.

As energy efficiency become even more important, it’s certain we’ll continue to see an increasing number of programs like the examples I’ve just given – all in an effort to do more with the same resources.

To learn more about EUCI’s latest energy efficiency conference, please visit the following link:

Energy Efficiency: Helping customers Transition into a New Green Energy Economy

Is the Federal Renewable Electricity Standard (RES), as proposed in the Waxman-Markey Bill currently making its way through the House, really the answer to our long term clean energy future?  According to most projections, the RES as it stands now would barely increase renewable energy development, if at all, above business as usual projections over the same time-span.  If that is true, then why create a federal mandate that would then require federal oversight?   Additionally, the bill includes provisions allowing for Renewable Energy Credits (RECs) to be bought and traded, which will result in complex accounting measures—thereby requiring substantial new reporting requirements (again increasing the federal oversight).

I’m not generally one to make the anti-big government argument, but I am having a hard time reconciling the benefits with the costs for this proposed RES.  Given that most states at this point have their own version of a RES (many of which are substantially more aggressive than the federal counterpart), and given the tax and other project finance incentives available for renewable energy development, I don’t really see how creating a federal RES is useful—especially if the RES created is so low that it will not actually increase development above what we are currently experiencing.  I do believe that we have to start somewhere with climate change legislation, and I know that federal laws are designed to create the floor not the ceiling (so states can always choose to exceed the federal RES).  But the way I see it, the federal government should not be in the practice of creating a basement instead of a floor—and certainly not when there is significant cost to the consumer to maintain this “basement.”

With that said, I think it is important to note that I am not actually against the idea of legislation that will increase renewable energy development, and address climate change concerns.  When the Waxman-Markey Bill was first introduced I thought it had some real promise.  Sadly the American political process has once again intervened and the result is expensive new legislation which is seemingly designed to maintain the status quo.  Perhaps Renewable Electricity Standards are policies best left to the states.  Perhaps it is time to “think outside the box” and develop new policies that will actually increase renewable energy development beyond business as usual.

Diane O’Neil

If you are interested in discussing a potential federal RES in more detail and learning more about how states are meeting their individual standards, come to our Western RPS Conference in San Francisco July 15-16, 2009. https://www.euci.com/conferences/0709-rps-west/

Blog, 6/12/09

The past nine months have been as hellish for industry players as for other large and small industrial concerns. Utilities, power producers and others in the space have clearly suffered under the rapidly rising unemployment, the severely shrinking economy and the powerful psychology of depression that have collectively undermined our sense of national (and international) well-being. This triple whammy has been mirrored in eroding load demand, slumping share prices and profits, resistance to change of any kind, and countless other consequences. The resulting retrenchment in business operations has pinched spending on capital improvements, enterprise-wide improvement initiatives and related spending on things such as training and travel.

But if you believe, as I do, that the spending undertaken to save the economy is gaining traction, you thereby accept the view that the economy is crawling its way out of the cellar. Question then is, what is the “next shoe” and what will happen when it drops?

From a power industry perspective the “next shoe” is not necessarily a gradual return to business as usual. Sure, as the transfusion of funds from the American Reinvestment and Recovery Act (ARRA) funds reaches the vital organs of the power industry in the form of transmission, smart grid and other direct subsidies, the industry will benefit. Add to that the upwelling of consumer confidence, the slow but certain reverse flow from savings to spending, and the “rising tide will lift all boats”. Or will it?

That “next shoe” sure to drop may not bring the stamp of stability that the industry hopes for. The disappearance of at least half of the financial markets on which the industry has relied to fund its capital expansion requirements will shake the industry business model, even the regulated side of the business. The funds just aren’t going to be there, at least domestically. The reduced construction that’s likely to occur may go less towards expanding capacity (and productivity) and more towards offsetting environmental impacts. Not challenging the wisdom of that, am I; rather, I’m simply speaking to where the money will not migrate (to the bottom line).

A concept closely related to what happens in the capital markets is what happens in the credit markets. Power industry mavens and executives know that this aspect of the recession is what has most hammered the confidence in counterparty transactions and the health of the balance sheet. This will further exacerbate the loss of liquidity that has crippled the access to capital.

When this “next shoe” drops in the third quarter of this year, Credit, Counterparty and Liquidity Risk Management for Power and Energy Companies must be the first order of business, for it is what will cushion the fall when business does not return to normal.

scoury@euci.com

Smart Grids, Renewable Energy and Carbon Limits are front and center as the country debates how we can fix the environment and the economy at the same time. An immense amount of new technology and infrastructure will be required and the workforce transition will be arduous. All the while, the companies that generate, transmit and deliver electricity must ensure the reliability and security of power for consumers. What does this translate to, in terms of costs, and who will foot the bill?

Other blogs and news articles put the overall cost of the smart grid over $100 Billion. This does not take into account new transmission that will need to be built to bring green energy online. This figure also does not cover the cost impact to utilities of carbon regulation along with compliance to increasingly stringent reliability and security standards that will come with more lines and more devices.

Ultimately, the money comes from the consumer’s pocket, right? Whether they actually see it in their energy bill or in their taxes, I believe each one of us will see a significant increase in the amount we pay for our electricity over the course of the next 10-15 years. At the same time overall demand will increase as we see wide scale adoption of electric vehicles and more electric devices in our homes. I don’t know how this will all balance out. I just hope that legislators, regulators and consumers are cognizant of the burdensome cost that will come with upgrading the grid. I know that the companies that provide us with our power are painfully aware of the dollars, and the vendors and contractors that support them are jumping with glee.

I’ll keep my eye on my electricity bill. I wonder how high it will go?

Suedeen Kelly, a member of the Federal Energy Regulatory Commission, on Tuesday said an entirely new agency to regulate the carbon allowance trading program would be far better than having existing US agencies regulate with it. The task of regulating the market would be so daunting that it would dwarf an existing agency’s mission, she said, although she admitted there weren’t any takers for her suggestion. The Waxman-Markey climate and energy bill would charge FERC with overseeing cash carbon allowance and offset markets, while a White House plan would delegate responsibility for carbon derivatives markets to an agency that stakeholders expect to be the Commodity Futures Trading Commission. But “if I were master of the universe,” Kelly said, “I’d create a new entity that that would be their sole job, because I believe that is going to be a huge undertaking.”

Oil prices briefly passed $69 per barrel Tuesday in a weeklong rally that appears short on fundamentals, yet exceedingly full of momentum. Average retail gasoline prices continued to march upward: A gallon now costs about 46 cents more than it did a month ago. After peaking at $69.05 Tuesday afternoon, a price not seen since early November, benchmark crude for July delivery fell 3 cents to settle at $68.55 a barrel on the New York Mercantile Exchange.

The U.S. Energy Department is working to finalize $18.5 billion in loan guarantees that the government hopes will boost the first wave of new nuclear plants in the United States in three decades, Energy Secretary Steven Chu said Monday. Agency staff is working “closely” on due diligence with four nuclear developers, but none of the 10 active nuclear loan applicants has been eliminated, he said, adding that the current $18.5 billion budget for nuclear project guarantees “probably would not go beyond four projects.”

During a visit to Fort Wayne, Indiana, where he toured a manufacturer of geothermal heating pumps, U.S. Energy Secretary Steven Chu on Tuesday announced nearly $50 million from the American Reinvestment and Recovery Act to advance commercial deployment of the renewable heating and cooling systems, which use energy from below the Earth’s surface to move heat either into or away from the home or building. The expanded manufacturing and installation of GHPs could aid in the creation of new jobs while reducing the use of fossil fuels.

A funny thing happened recently and it wasn’t on late night TV.

Google - a company known more for being the king of online search, creative working environments & ad-words - became a leading player in energy information. Now I know some of you have an understanding of their beta developer project named PowerMeter and a select few may already be partnering with them (more on that later) but the delegates at the San Francisco Demand Response & Energy Efficiency World conference received a first-hand look at the future of energy information.

My guess, is Google’s’ PowerMeter is just the beginning of both its own development as an application (see: igoogle) and as a means to redirect a larger audience to their individual consumer offerings like igoogle, android and others.

The essentials of PowerMeter are easy to understand: If your utility is a partner with Google, simply use the igoogle.com platform and you can align your energy usage at your home with the PowerMeter app - and just like magic - your personal energy usage is displayed. Other additions include ability to create and manage an energy budget, compare others energy usage to your own and easily see on a graph where your “peak” moments are.

It looks a lot like this:

credit: Google.org

Google is not the only company in this field, and definitely not the most experienced. Other companies like EnergyHub, Tendril, Onzo, Agilewaves, GreenBox, The Energy Detective, PowerMand, Green Energy Options, Energy Aware will all play in the hardware and/or software field and can provide devices for your home and office. Some of these companies already have products consumers can purchase.

But… they do not have something that Google does: people & lots of them. When was the last day you didn’t use Google at least once? Were you vacationing on an island without internet? Are you lying to me right now…?

The point is this changes the game and everyone knows it. How will Google perform in the future with new partners? Will there be mergers and acquisitions? Will this be a serious app - or just another radar blip for them?

By giving consumers a free window into their energy use, Google may have upped the ante for competitors (are there any?) and changed the way we will alter our energy information permanently.

Current partners: http://www.google.org/powermeter/partners.html

- Heath Clendenning, Conference Producer, EUCI

It is generally taken as fact that Wind will be the principal source of new renewable power in the US, yet peculiar comments are beginning to pop up that make me wonder.

Most sources (including the NREL May Analysis of Proposed Federal Renewable Electricity Standards) conclude that we will have a rapid expansion of wind generation through 2012 as a direct result of the extension of the Production Tax Credit (PTC).

FPL explained further in their Q1 results

(Selected portions from a transcript courtesy www.seekingalpha.com)

“For example, the legislation which extended the wind production tax credit for three years provides us with much needed long-term certainty in our investment planning for new wind development. Based on what we know right now, we are still planning to add over 1,000 megawatts of new wind capacity this year and continue to grow our position as the North American wind power leader.”

“And the other thing that it does, when taking the convertible ITCs, as opposed to the production tax credits, it gives you a whole heck of a lot of certainty when it comes to cash. Convertible ITC, you essentially get 30% of the qualified construction cost of the project in cash 60 days after COD or 60 days after application.

When you’re dealing with production tax credits, you need to estimate what your taxable income is going to be in the future and determine when in essence you’re going to be able to use those tax credits in the future, which is an easy enough calculation if you can determine what additional tax incentives Congress and others may give you in the future.

But cash shouldn’t be overlooked. It’s a big, big amount for us. Your example there of the 600 to 700, if you just use 700 megawatts and you multiply that times $2,000 of KW, it’s about $1.4 billion, 30% of that’s over $500 million that would be coming back to us within the next 12 months or so.”

“The stimulus legislation also created the option to temporarily elect either a 30% investment tax credit or a convertible ITC in lieu of the PTC. These additional options enhance our ability to fund new wind development and send a strong signal that policymakers are committed on a longer term basis to expanding the use of renewable energy.”

Yet, according to EERE, The U.S. wind power industry installed only 2,800 megawatts (MW) of new generating capacity in the first quarter of 2009, compared to 4112 MW in the fourth quarter of 2008.

The strongest indication of a lull in the wind came last week from New Energy Finance:

(Selected portions from that report)

www.newenergymatters.com

“~ The US wind sector today finds itself in a period of exceptional angst. Virtually overnight, it seems, demand for wind turbines has evaporated. Reason number one: lack of capital to finance wind projects.”

“Reason number two: the lowest natural gas prices in six years. There was considerably less talk of this factor at the event but natural gas dictates electricity prices in a number of US power markets and competes directly against wind.”

“There is general consensus that the massive economic stimulus bill Congress passed in February offered unprecedented support for the sector. But that hasn’t stopped the industry from getting very antsy as the administration sorts out the rules for disbursing the estimated USD 66bn.”

“This year has seen precious few deals close with the consensus being that guidance on how the Treasury Department’s new grants-in-lieu-of-tax-credits will function is needed before the cash starts to flow again.”

Natural Gas was so cheap ten years ago (below $2 at Henry Hub) that the power industry all decided to use it for co-generation, and pricing went flying into the teens. Yet now, when it is priced back below $4, it out competes all other sources of fuel on a least cost basis.

NG collapsed from a July 2008 high of $13 /MMBtu and sank to 7 year lows near $3 just 2 weeks ago.

Although it has had its best rally in over a year, NG prices are still hovering under that $4 level, a price that is so cheap, that it even pushes coal out as least cost, let alone renewables like wind.

To give you an idea of how competitive NG pricing is, I was told by a Utility that it would take Natural Gas at $7.25 to make wind competitive again. I don’t know if that is true, but if so, we do not see prices like that on NG until we get out to between the 3^rd and 4^th year of the forward price curve.

Switching from Coal to NG does drop the environmental carbon impact in half, but NG not considered a renewable like wind or solar, so it is not a de-carbonized solution, only an economic one.

So who is right, those that talk the great benefits of the ITC / PTC stimulus, or do we have to wait for Natural Gas prices to rally to spur renewed action in the wind industry?