At EUCI events in Chicago last week, I had the opportunity to hear from representatives from dozens of registered entities as they discussed the challenges associated with compliance to NERC standards and requirements as well as the complexities of the audit and enforcement process. As most industry insiders know, the owners and operators of the bulk electric system have always had a reliability focus and the system is really very reliable. For the most part, the violations that have been self reported or found in audits are due to a lack of documentation, not a lapse in procedures that directly affect reliability. The financial burden to build and maintain compliance programs is tremendous. And after it’s all said and done and all that money has been spent on managing documents and evidence (instead of something like tree trimming) is the system more reliable??

One opinion offered last week at the conference was that, in the long term, yes we will see less major blackouts over time. As a counterpoint to that, what’s the cost of a major blackout vs. the cost of 10 years of NERC compliance? I don’t know, and neither does anyone else. Registered entities are starting to put in place programs that will track costs of compliance so that we can assign real numbers to these efforts. I am anxious to hear more about these studies and will watch this issue closely. In the meantime, state commissions and consumers are becoming aware of the impact that these expenditures might have on rates. How will the cost/benefit of NERC compliance be established? As NERC registered entities struggle to find resources to meet compliance mandates I see that the focus is on activities that demonstrate compliance and I hope that the activities that actually support reliability and a more robust system are not short changed.

EUCI blog

August 25, 2010

By Kelly Murphy

A couple of weeks ago, a well-respected consultant startled me by saying, “Cap and trade is dead for at least the next six years.” He claimed that was the consensus on the Hill due to likely changes in the political landscape and the demise of cap and trade bills.

Yet the power industry has invested uncounted years and manpower preparing for cap and trade, so now what?

At present, there are two leaders in the realm of likely outcomes:

• “Policies and measures” led by the EPA
• A carbon tax

No, you didn’t misread that second option, but first, let’s lay out option No. 1.

“Policies and measures” is a simple way to describe how the EPA will take over where Congress left off. The EPA will use the Clean Air Act in conjunction with other tools to create a de-facto carbon policy. That EPA strategy is the current presumed consensus. We could spend another several pages on the attributes of that path, but instead, let’s look at competing option No. 2.

In an upcoming interview in the September/October issue of Technology Review, Bill Gates talked energy.

Gates is a member of the American Energy Innovation Council, which released its business plan in early June, advocating fundamental changes to US energy policy. In that plan, Gates and others admonished the abysmal spending on basic energy research and advocated “a clearly defined national energy policy” that would invest – at an absolute minimum – $5 billion each year in continuing energy R&D. In fact, the AEIC says that if we invest only that meager amount during the first year, forget the idea altogether.

The AEIC also said this: “The US sends $1 billion overseas every day to purchase oil, but publicly funded research in advanced vehicles and alternative fuels totals just $680 million annually — about 16 hours worth of oil imports. Blackouts cost this economy over $1 billion each year, yet the nation typically spends only $170 million per year on electricity delivery and reliability. We will not save money by starving ourselves of future options.

“On the other hand, if we starve energy research, there is no doubt that this country will have constrained future options. The national energy system is almost unfathomably large, and it will take many decades for its sunk investments to turn over. Today’s investment decisions on transportation systems, power plants, buildings, and factories have the effect of locking in long-term consequences for our economy, national security, and environment. There is vast room for improvement in our energy system.”

Also in the Technology Review article, Gates mentioned that if feed-in tariffs are properly accounted for, the world has spent a massive amount of money that would have been far better spent on energy research. “We should have a carbon tax,” he said, adding, “it’s ideal to have a carbon tax, not just a price on carbon. (We need) a regulatory approach.”

A coal supplier I know told me that “we are blessed and cursed with cheap and abundant” energy here in the US. His point was: How will we be willing to change when cheap energy has made us fat and happy?

Complacency inevitably has unfavorable outcomes.

This week in China, there was an example of the harsh consequences of sluggish planning. Chinese officials stood by as national coal consumption leapt a massive 22% last year. Due to a tremendous increase in trucks loaded with coal, officials were greeted with a 10-day traffic jam (10 days, not 10 hours) on the G6 highway leading from Mongolia to Beijing. Undoubtedly, this is an overblown story, but it dramatically shows the consequences of complacency when a country dependent on coal is lulled to sleep due to cheap energy.

Let’s take a vote to gauge your opinion of these options – are you in favor of No. 1, No. 2, or how about all of the above?

I guess this is a kind of “Dear John Letter” to all the wonderful people I met during my time at EUCI—because by the time you read this note, I’ll be gone!  As I embark on a new adventure and a new (old) career, I am struck by anxious excitement for what lies ahead while feeling sadness and regret over leaving a position I have really enjoyed over the past year and a half. 

Working with the electric utilities industry has been an enlightening experience, and the process of organizing conferences is a job unlike any I have ever known.  The combination of the two has instilled a sense of intrigue regarding this nation’s energy future that will power me well into the future (pun intended).  I look forward to utilizing the knowledge I gained here in my new endeavors, and I am confident the education I received through producing and attending conferences will no doubt assist me as I continue to work in this industry I have grown to love. 

However, what I most value about my time at EUCI, and what I will miss most, is the opportunity to meet and work with so many amazing people – cliché as it may sound.  The state of our current electric system is in need of some help, and as a nation we will continue to grapple with balancing energy independence and reliability concerns, but I firmly believe the people in this industry are up for the challenges.  The collegial atmosphere that transcends the entire industry (in my experience) makes working within its borders both rewarding and enjoyable.   

 The willingness of experts to teach others about their expertise in furtherance of a greater good leaves me with a renewed sense of faith that, even though we don’t all always agree on the best path, this nation’s energy future is in good hands.  As I listened and learned at my numerous events, I was struck by the breadth of knowledge that the speakers and the attendees possessed, and more importantly, that they were excited to convey.  The universal goal among those in the industry to continue to advance the system is admirable and inspiring to those of us on the fringes.

As you sit in your desk on this Friday in August gazing out the window and killing time before the weekend starts, take a moment to think about how lucky you are to be a part of an industry full of thinkers and doers.  To those I have worked with in the past, thank you from the bottom of my heart!  It has truly been a pleasure knowing you.  I hope our paths cross again at some point in the future, and until then, please keep on pushing the envelope of what is possible—and of course let me know if there is anything I can do to help!

Sincerely,

Diane  O’Neil

As I talk to people in the electric power industry, I am seeing a lot of interest in High Voltage Direct Current (HVDC) technology for transmission. HVDC is nothing new and HVDC transmission lines have been in service for decades. Why, then, the renewed interest in HVDC?

A majority of all of the new generation being proposed, planned and built is based on renewable energy resources. In many cases (think large scale wind, offshore wind, solar and hydro) these resources are located in remote areas. HVDC is best known as an efficient alternative to transmit power over long distances because there is less line loss. So, HVDC is a better way to get intermittent power from the middle of nowhere to the load that needs it. One other aspect to be considered is that it’s fairly easy to add energy storage capability at the point where the voltage is converted from DC to AC. Energy storage is thought to be the missing link that will help out level out intermittency issues for renewable energy.

In addition, as the ability to site new transmission becomes more difficult and more expensive, HVDC also has appeal because you can have a higher capacity in a smaller right of way. In fact, it’s even possible to upgrade existing AC transmission facilities to a higher voltage with HVDC technology which can save money in the form of shortened project timelines, minimal additional right of way purchases and less environmental impact.

Traditionally, HVDC has been thought of as a high cost option that was only considered economically viable when very long distances were involved. However, as the costs of the technology come down while the mandates for renewable energy and siting headaches increase, HVDC is starting to look like pretty good alternative to achieve our nation’s energy goals.

The recent EUCI SMR symposium in Arlington, Virginia, brought together many experts to discuss new technologies and issues associated with this rapidly advancing segment of the nuclear arena. The symposium focused on training professionals on new system designs and discussing issues critical to moving the new technology forward. Outstanding speakers (to include, Senator Fred Hemmings, state senator from Hawaii, who addressed the necessity of the SMR community to band together and urge government agencies to take swift action to support the technology, and the Honorable William C. Anderson, former Assistant Secretary of the Air Force, who provided new information on military and disaster recovery applications for SMRs), addressed a wide range of technical topics associated with this fledgling industry. Throughout the symposium, one nagging question seemed to over shadow the development of any small reactor technology in this country.
Is the nuclear regulatory system in the United States ready to adjust and amend to embrace nuclear technological advancements?

During the last one hundred years, the world has seen unfathomable advancements in science, medicine, and technologies. In most cases, societal acceptance and government supervision have stayed relatively abreast of the developments and their use was implemented eventually. Since the incident at Three Mile Island (1979) and disaster at Chernobyl (1986), regulatory requirements in the U.S. have slowed the commercial implementation of new nuclear technologies. One side of the discussion contends that the regulatory structure is absolutely necessary and should not be adjusted from current form. The other side argues that an inflexible bureaucracy, not in step with the latest technologies, has been created in the COL process, Part 50 (and its myriad of appendices), Part 52, and the complex series of associated regulations.

The Nuclear Regulatory Commission (NRC) is a highly professional organization, not only tasked with continuous review of current safety issues at the 104 operating plants, also tasked with review and approval authority for newly offered plans and designs. The question is not concerning the organization, rather the immense bureaucracy that has developed through the years (as it has a tendency to do in large government processes) that may no longer apply to new technologies, such as, small, modular, and mini reactors. Many other nations of the world are closely monitoring the new technologies and some nations including Russia, China, Korea, Japan and even the tiny island nation of the Commonwealth of Northern Mariana Islands are developing plans and programs.

The Obama administration and some members of Congress continue to signal support for moving forward with small, modular, and mini reactor technology. As everyone is now well aware, Secretary of Energy, Dr. Steven Chu, in a March 23, 2010, Wall Street Journal opinion- editorial clearly supported the United States developing nuclear power and small, modular, and mini reactor technology in stating, “Our choice is clear: Develop these technologies today or import them tomorrow…if we can develop this technology in the U.S. and build these reactors with American workers, we will have a key competitive edge.” The administration has committed $39 million to research and development of small modular technologies.

Last month, Senator George V. Voinovich (R-OH) introduced an expansive nuclear power bill entitled, “Enabling the Nuclear Renaissance Act.” In section 301, Small Nuclear Reactor Development and licensing, the bill increases the allocation to development of SMR reactor technologies to $100 million per year over the next years. Additionally, the bill would direct the Secretary (of Energy) to establish programs to achieve a small modular reactor design certification by January 1, 2016; licensing of the reactors by January 1, 2018; and power operation of a small modular reactor by January 1, 2021. The bill has been sent to the Committee on Finance for consideration.

Even if the lofty bill of Senator Voinovich is passed relatively intact, the question remains if the current bureaucracy for design certification and licensing can be applied to new SMR technologies and meet the timelines in the bill. The NCR cannot act without definitive guidance from Congress. Additionally, will these timelines, even if eventually addressed in Congressional legislation, be sufficient to keep the United States companies competitive on the world stage or will the realities of Secretary Chu’s statement come to bear: we’ll import them tomorrow? Your opinions are always appreciated in this blog. Please look forward to many future EUCI discussions on nuclear power and more events on the emerging technologies of small, modular, and mini nuclear reactors.

Last week at EUCI’s Mergers and Acquisitions in the Renewable Energy Industry conference in Boston, much of the conversation focused on the availability of financing and the importance of putting a price on carbon in order to ensure a successful and profitable renewable energy industry for years to come. In the meantime, the utilities buying the power, the developers trying to make a living off developing renewable energy projects, and the financial institutions lending to make the projects possible are all doing an intricate dance of risk allocation and profit maximization in an uncertain world.

Somewhat conflicting interests among parties with a common goal (to develop a project) should be expected in all new development projects, as everyone involved is trying to get the best deal possible for themselves. However, add in the uncertainty of government incentives, PUC rate approval, transmission line availability, and decreasing power demands resulting from a down economy, and it is a wonder any projects are getting built at all right now. All of that is to say I understand the difficulties the respective parties face as they navigate through the development process.

That said, it has never been more apparent — to me, at least — that the respective parties seem to be at opposite ends of a very long bargaining table. In my role as a conference producer, I spend much of my time trying to identify the most cutting-edge issues stalling development in order to plan events to address these problems. In Boston, it struck me that right now one of the biggest problems plaguing the industry can only be described as the blame game. Utilities say the banks aren’t lending, the banks say the utilities require impossible PPA rates, and the developers are playing the victim of the bank-utility stand-off. It seems the only thing all groups can agree on is that putting a price on carbon is vital to continued renewable energy development.

While I agree in principle that putting a price on carbon will help bring the parties to a much shorter bargaining table, I am not convinced it is the end-all, be-all answer, or at least it doesn’t have to be. The price of carbon has become a scapegoat for an industry at a crossroads. Focusing all of our attention on a solution that has no short-term possibility of coming to fruition is unproductive and disappointing. I’m not saying I have the short-term answer, nor am I saying I think we should give up on trying to price carbon. I’m just saying I think it is time to stop blaming one another and start trying to work together on a new solution. It seems pretty clear the blame game isn’t getting us where we need to be.

Diane O’Neil 

Christopher Kolomitz, EUCI

Up until seven weeks ago, I just flipped the switch, plugged something in, and went about my business without a thought about where the electricity I was using came from.

Now, just shy of two months on the job at EUCI, I’m driving my Jeep and nearly running off the road looking at substations and transmission lines while thinking, “Where is the energy coming from for this substation? How’d they build it? Who owns it? How can more renewables reach my house?”

That last question is my primary focus, since I’m looking at how utilities are using renewable energy to achieve state renewable portfolio standards, reduce greenhouse gas, and meet socially warranted goals. While I’m skeptical renewable power will completely replace fossil fuels, I am confident they’ll serve as important conduits to national growth. But, that optimism comes with a bit of unease.  

Just in the past few weeks, Spain has surpassed the U.S. in the amount of energy produced from solar thermal projects. Every day I’m reading about a new offshore wind development in the U.K. Canada, particularly British Columbia and Ontario, has aggressive goals for renewable energy. China remains a behemoth, investing a reported $9 billion a month into clean energy. I’m afraid that without aggressive steps, the U.S. will be importing renewable energy technology from overseas instead of developing and manufacturing it domestically.

To keep pace with the rest of the world in renewable energy developments, we must continue to focus on growing the best and brightest students. Whether the effort begins in primary schools or continues within higher education, it’s a goal vital to reducing dependence on fossil fuels and keeping one step ahead of the world. Those best and brightest individuals have already made huge gains developing green-based manufacturing and ideas, but to keep momentum going, the country needs greater commitment to science, math, and exploration of new technology.  

We need continued governmental support in the areas of financing, technical advancements, and fast-tracking of permitting. While millions have flowed in recent months from loans, grants, and stimulus money for green programs, we can’t afford stops and starts like those years ago that delayed advances in geothermal and solar industries. A sustained pipeline of money helps continue the renewable energy momentum with funding of research laboratories, test sites, and staff. Increased use of public-private partnerships needs further consideration as well, especially in the areas of geothermal.

From local to federal levels, a common theme within renewable energy project development seems to be an abundance of red tape. While a few municipalities, agencies, and commissions have done well in cutting delays for some projects like wind, greater efforts need to be made. Developers and utilities need clear rules to comply with, and implementation of national or regional standards for renewable projects is a starting place.  

Consumers need continued access to the green power revolution. From geothermal heat pumps to backyard wind turbines and solar systems, small start-up companies are filling the niche – but at what expense to the utilities? Distributed generation is happening and gives consumers a greater sense of control. While excellent small and large examples of DG are out there, it remains up to the utilities to design programs that promote collaboration. Let’s encourage and continue to foster the idea of partnerships between commercial rooftop owners and residential-scale wind and solar generators by expanding storage options and capabilities. While a majority of battery research has occurred for electric vehicles, priority needs to be given toward storage of energy created from renewable sources at residential and utility sizes.  

Perhaps the biggest contribution to continued renewable development can be the adoption of a federal renewable portfolio standard and passage of strong energy legislation. During the week of July 26, it is expected that a federal energy bill will be introduced in Washington, D.C. With only a few weeks until the August recess, Congress will need to act fast to pass meaningful legislation, analysts say. And, with no clear progress willing to be made on a federal RPS, it seems that debate may have to wait until after the November elections.

Paradigm Shift Coming for Power Generation

Blogged By: Darrell Proctor, EUCI

Electric utilities are rethinking the way they produce power and taking a hard look at the efficiency of their plants, all with an eye toward the economics of their business and the regulatory landscape.

Most energy experts agree that regardless of shifts in political power and whatever climate bills come out of Washington, D.C., it will pay for utilities to begin moving toward cutting power plant emissions and making more use of renewable sources. Coal-fired plants will be retired or retrofitted to cut greenhouse gas emissions. Expect to see more use of natural gas and biomass, along with solar and wind.

A recent report from Navigant Consulting prepared for Boston-based Ceres (a group of environmental groups and institutional investors) noted “the traditional operating paradigm of building large generation facilities to sell ever-increasing amounts of electricity is changing.” The report is titled The 21st Century Electric Utility: Positioning for a Low-Carbon Future.

Tom King, National Grid U.S. president, said in a foreword to the report: “The modern utility must expand its vision and adapt to changing circumstances by providing energy sustainably for our customers, communities and shareholders.”

Contributed by Stephen Coury, EUCI Conference Producer

Enough of this mild weather stuff – bring on the unrelenting sun! This week’s heat on the east coast could be just the trigger we need to fire out of the lingering recession.

No disrespect intended, here. The toll taken by the withering weather is not to be scoffed at or trifled with. Its onset in the middle of July is hardly a surprise, but coming on the heels of a fairly mild winter and spring its arrival packs a jolt.

From a power industry standpoint, the onset of severe summer conditions brings with it escalating demand for that most basic of commodities: electrical power. Given the slump in commercial capacity over the past 18 months, the concomitant drop in load has produced dramatic declines in power and energy commodity prices. This has been beneficial for companies and consumers to the extent that these conditions have contributed to lower power costs. It hasn’t been helpful, though, to the utilities and companies that generate, distribute and transmit the electrons that power their business and the economy as a whole. At the same time, and in combination with the larger economic malaise, many of the regulated utilities have been hammered by rate case outcomes that have furthered impinged their margins.

In the face of these circumstances, mandates for renewable energy as the baseload source to power the grid require additional capital investment. This comes in tandem with EPA-driven (and eventually congressionally-mandated) reductions in greenhouse gas-contributing generation sources. Add to this boiling pot more stringent resource adequacy and reliability benchmarks, the investigation and rollout of smart grid and related technologies, as well as the aging “infrastructure” that characterizes much of the generation, distribution and transmission system, and the result is a recipe for bitter porridge.

The corporate response in the power industry has been, above all, prudent. Few industries in the past few years can point to similar stability. Yet the constraints laid out above, and others not cited, create their own investment horizons. Now more than ever, utilities and other power-related business must do more than just “stick to their knitting”, which to this point has characterized their management of these financial compression factors.

Longstanding corporate practices such as portfolio optimization and risk management must be re-visited. Certainly, the prudent course navigated by these corporate functions over the past few years can’t be abandoned. Rather, their compass heading must be re-oriented to incorporate the emerging realities for funding continuing operations and capital expansion.

All this is much easier said than done, of course. A good push always helps. Reversing several quarters of slackening power demand is a big part of the return-to-health puzzle. Sorry, but this summer’s east coast heat wave could be just what the green eye-shade doctors ordered.

Most residential electricity consumers don’t pay much attention to their electricity, as long as the monthly bill comes in around the amount expected and their lights come on when they flip the switch. For the most part, customers don’t care where their electricity comes from or how it gets to them. However, the electric power industry is undergoing significant changes in order to meet regulatory and legislative mandates centered around renewable energy, energy conservation and smart grid initiatives. These activities will have a great impact on residential energy customers. Active customer engagement is essential to ensuring the most positive outcome to this immense amount of activity.

How do we get residential end users to care about their electricity consumption? Through prices? It seems that prices have to really hurt to cause a change in behavior, and most Public Utility Commissions are unwilling to approve rates that will inflict that much pain. What about concerns about the environment? These people do tend to be a bit more likely to make some small changes, but the overall impact is minimal.

The missing link is the way in which these customers can access information and interface with their electricity provider. In order for consumers to care enough to make active management decisions, they must be able to “see” their usage, understand the implications of their consumption and be given easy tools to use. Any type of implementation that encourages energy efficiency, conservation or demand management must include some sort of in-home energy management component.

We live in an age of instant information, smart phones, smart homes and now smart grids. We need to create smart customers that will be engaged and enabled to make decisions. AMI alone, or even AMI with dynamic pricing, will not yield the results that are needed. Smart grid projects must include a customer interface that is easy to use and understand or electricity will remain invisible to these residential customers that the industry is spending an awful lot of time and money to reach. Without that crucial link from technology to consumer, all of these efforts may be wasted.