One Merchant Generator’s Plans for a “Distributed Generation-centric, Disaggregated Future”

by Bob Shively, Enerdynamics President and Lead Instructor

The threat that new technologies and market evolution have on the current utility business model is very real. In a world of declining load growth driven by energy efficiency and 178380557increasing viability of distributed generation, utilities are faced with finding new strategies for success.

Meanwhile, it seems that merchant generators who make their money selling power from centralized fleets are even more vulnerable. After all, utilities assume consumers will need a distribution grid for some time and have some regulatory protections.

For a glimpse into how the transition to the future may go, we listened in on NRG Energy’s fourth quarter earnings call on Feb. 28, 2014.  NRG Energy, the largest merchant generator in the United States, is paradoxically increasing its fleet of central generation at the same time that CEO David Crane describes an “inexorable trend towards a distributed generation-centric, disaggregated future.”

According to Crane, this future will feature “individual choice and empowerment of the American energy consumer . . . That this future is going to occur is, in my opinion, inevitable. That it is going to occur faster than almost every person thinks it’s going to occur is highly probable.”

In fact, during the call’s question-and-answer period, Crane made the statement that he believes residential solar will become cost competitive in 20-24 states within 12-24 months.  He described a hybrid solar/gas-power Stirling engine technology called the Beacon 10 that he says will create a “non-intermittent” distributed generation (DG) system to combine the best of solar power with the wide availability of the natural gas distribution grid. This differs from many other solutions that depend on large amounts of batteries to firm renewable power.

NRG provided the following chart to address how it plans to bridge the current world with Crane’s vision of the future:

NRG chart

Exciting change for the future? It sure seems so. But as Crane reminded everyone at the close of his remarks, success depends on NRG taking care of day-to-day business. If you can’t survive the next few years, you can’t build the future.  And taking care of business now requires successfully running a central fleet of generation.

 

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Electric Industry Overview v3 Features New Look, Updated Content

By John Ferrare, Enerdynamics CEO

At Enerdynamics we recently released an updated version of our popular online online trainingcourse Electric Industry Overview. Here is a brief behind-the-scenes glimpse at our process of ensuring that Enerdynamics’ online courses are timely, accurate, and effective training tools.

Our online courses are updated about every three years. As anyone working in the industry knows, a lot can change in three years! For instance, the previous version of Electric Industry Overview had no mention of the Smart Grid. We also combined our regulation and deregulation modules into a single module called Electric Regulation. Additionally, customer data has been updated, and the course also addresses the increasing use of natural gas and renewables as fuels for electricity.

Above and beyond updating content, a course revision also entails updating the technology used to deliver the course, and, in this case, the actual look of the course. The evolution of our online courses in the last 10 years has been significant. Our original “online” offerings were actually recordings of live courses we offered. We’ve learned a lot about eLearning since then — first and foremost that successful online training is its own medium and thus requires its own approach.

As evidenced by the latest release of Electric Industry Overview, our online courses today offer a user-friendly, interactive experience designed specifically for the online environment. Today, our Electric Industry Overview subscribers enjoy a fluid and easy-to-navigate tour of the electric business including:

  • Electric consumers and their needs
  • The components of the physical system and how it is designed to deliver power to end users
  • How the physical system is operated for maximum efficiency and safety
  • How and why the electric industry is regulated and why it has experienced various degrees of deregulation
  • How markets function and the wholesale and retail services offered in them
  • And, for the first time, an in-depth look into what the future holds for the electric business

We also recently updated the online training “skin,” which is the online player from which a learner navigates the course, advances to other parts of the course, uses the search feature, accesses the glossary/acronyms, and participates in course exercises and quizzes. This update makes Electric Industry Overview more navigable and aesthetically pleasing.

Our other training products are updated with similar goals in mind. Our live instructor-led courses are updated every time they are delivered. And books are revised on a schedule similar to that of our online courses — not an easy task, but we believe that keeping our curriculum current and relevant is crucial to the efficacy of the learning.

Want to test drive the newly released version of Electric Industry Overview? A free online demo is available on our website.

The recently launched version of Electric Industry Overview is available in two versions: the U.S. version and the Canadian version, which expands on the U.S. version to include data on Canada when it differs from what is presented for the U.S. Each version is $295 per subscriber. Companies seeking to purchase bulk subscriptions enjoy discounts when purchasing as few as 10 subscriptions.

For more information on any of our training products, please contact me directly at jferrare@enerdynamics.com or 866-765-5432 ext. 700.

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EU Asserts Need for Energy Independence after Russia’s Actions in Crimea

by Christina Nagy-McKenna, Enerdynamics Instructor

Last week I wrote about Ukrainian, Russian, and European natural gas markets and the recent developments that may present an opportunity for U.S. gas producers.

Well, it’s been another busy week in the European natural gas market. Gas pipeline projects are already responding to the events in the Ukraine: South Stream is dead. Shah Deniz lives. The EU is strategizing to reduce its energy dependence on Russia while EU x Russiaprotecting all of its members from possible energy blackmail. And Bulgaria wants to be a hub for all new pipelines to Europe.

Perhaps the clearest insight regarding the state of Euro-Russian relations comes from Andrea Merkel, the chancellor of Germany, who said that there is “unbelievable loss of trust in Russia.”

Merkel, the leader of Europe’s strongest economy, is advocating that pipeline flows across Europe be reversed if necessary to protect countries to the East that are almost completely dependent upon Russian natural gas. Given that Germany and Russia are linked by the Nord Stream pipeline, Merkel’s statements seem to indicate that Germany will ship Russian gas eastward to help out its neighbors if necessary.

Gazprom built the Nord Stream pipeline system along the Baltic Sea to Germany, deliberately creating a direct path to the EU, which bypassed Ukraine. The next project, South Stream, is supposed to cross the Black Sea, again bypassing Ukraine. Natural gas companies from Germany, Italy, France, Hungary, Bulgaria, Greece, and Serbia are partners with Gazprom. However, given the events in Crimea, desire to add Russian gas supplies to central and western Europe has dissipated.

Paolo Scaroni, CEO of ENI, an Italian energy company and a partner in South Stream, said last week that the future of the pipeline is “somewhat gloomy.” European Council President Herman Van Rompuy stated that the EU leadership has decided to reduceits their energy dependence “especially with Russia.”

Another natural gas pipeline suitor is on Europe’s doorstep, however. Shah Deniz is a project that will bring Azerbaijani natural gas to Europe. In December 2013 EU leaders and Azerbaijan came to an agreement for the project that will originate in Azerbaijan and travel through Georgia, Turkey, Greece, Italy, Bulgaria, and Albania. The project has several large phases, but in the end, not only will a new non-Russian source of supply be available to the EU, but the southern European gas systems will finally be interconnected.

PipelinesEurope

Standing precariously in the middle of this malaise is Bulgaria as it tries to not offend either Russia or the EU. The former Eastern Bloc country simply wants to be the natural gas hub for all new pipelines, whether they originate in Russia or elsewhere. It’s probably the safest strategy for a country that not so long ago was not free to decide anything on its own.

References:

Bulgaria Braces for Larger Role Amidst Ukraine Crisis, Natural Gas Europe, March 17, 2014.

Gas Politics After Ukraine, Brenda Shaffer, Foreign Affairs, December 17, 2013.

Europe Scrambles to Break Gas Dependence on Russia, Offers Ukraine Military Tie, Ambrose Evans-Pritchard, The Telegraph, March 21, 2014.

Russia’s Invasion of Crimea Has Caused It To Lose the Latest Battle in the Pipeline Wars, Steve LeVine, Quartz qz.com, March 25, 2014.

South Stream Victim of Crimea Annexation, EurActiv.com, March 23, 2014.

 

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Ukraine, Russia, and European Natural Gas: Is This an Opportunity for U.S. Producers?

by Christina Nagy-McKenna, Enerdynamics Instructor

In early March after the Ukraine’s President Viktor Yanukovych fled the country, Gazprom, the state-owned Russian natural gas company, announced it would no longer honor a deal to provide the Ukraine with deeply discounted natural gas. This past week,479135481 Russian forces seized a natural gas terminal in the small Ukrainian town of Strelkovoye, just over the Crimean border. Days later, the citizens of Crimea voted to rejoin Russia.

What impact will these actions have upon the natural gas supply of Eastern and Western Europe?  And what impact, if any, will it have on the United States?

Twice in recent years – in January 2006 and January 2009 – Russia stopped the flow of gas through the Ukraine because of political issues. Over half of Russia’s gas exports flow through the Ukraine. Sixteen percent of the total gas consumed in Europe passed through the Ukraine in one of three major pipelines that carry Russian gas to many E.U. countries as well as non-Balkan E.U. states, Norway, Switzerland, and Turkey according to estimates by the EIA[1]. This gas accounted for 34 percent of European gas demand[2].

If the flow of natural gas to Europe is again curtailed, Europe will be directly affected by lower supplies and presumably higher prices. However, this time such actions may also create an opportunity for the United States to begin selling LNG into the European market.

Congressman Cory Gardner of Colorado is already working to give U.S. gas producers a foot into the European market. Last week he introduced a bill to approve export applications for LNG immediately in order to spur U.S. exports and reduce Europe’s dependence on Russian natural gas.

We will follow up on this discussion and provide updates as events continue to unfold.

Footnotes and references:

[1] “16% of Natural Gas Consumed in Europe Flows through Ukraine,” Today in Energy, U.S. Energy Information Administration, March 14, 2014.

[2] “In Ukraine Crisis, Russia’s Natural Gas Tactics Could Backfire,” Kenneth Rapoza, Investing, March 5, 2014.

“Russia Seizes Gas Plant Near Crimea Border, Ukraine Says,” David M. Herszenhorn, Peter Baker, and Andrew E. Kramer, New York Times, March 15, 2014.

“Can Crimea Survive Without Ukraine’s Power?” David J. Unger, The Christian Science Monitor, March 17, 2014.

“Ukraine Moves to Protect Europe Natural Gas Pipelines Amid Russia Crisis,” Platts, March 17, 2014.

“U.S. Should Support Ukraine with Gas, Lawmaker Says,” UPI Business News, March 18, 2014.

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Lucrative Retirement Plan Includes Solar Energy

The following post is courtesy of Clean Energy Collective and provides a unique angle to investing in solar energy.

By Emily Hois, Clean Energy Collective

Today’s life expectancy in America is eight years longer than it was in 1970. That’s eight more years to enjoy retirement; and eight more years of savings to put away. In a road with solar and windchallenging economy, there are various factors that can threaten a comfortable retirement, such as declining property values and interest rates, higher living and health care expenses, and a lower percentage of employer contributions. A well-planned retirement strategy is crucial.

Stuart Ritter, vice president of T. Rowe Price Investment Services, says it can be difficult to stay on budget while trying to make a lump sum last 30 years, especially in the first years of retirement. “That’s why we encourage people to think of it more in terms of income [stream], and not as a balance,” he tells USA Today.

One source that can be used to generate steady revenue—a source we can rely on for millions of years—is sunshine. More people are discovering that by purchasing their own solar panels and harnessing the sun’s energy to produce their own power, it’s possible to collect a paycheck without lifting a finger.

On the Rooftop
Orange County, Calif., residents Wendy Moonier and her husband Fidel Garza were brainstorming how to manage their money for retirement. After the mortgage was paid off, the electricity bill would remain—and increase as the years progressed. With a roof that needed replacing and the attractive California solar rebates, it was the ideal time to go solar.  Moonier and Garza purchased a 30-panel solar photovoltaic (PV) rooftop system from Southern California Edison. They’re saving several thousand dollars each year on electricity and expect their system to pay for itself in 15 years. “It’s the best investment we’ve ever made on our home,” Moonier reveals. “When I saw how well this works, I thought everybody should have this … It’s the only thing we’ve done on our home where we’ve seen an immediate return.”

Newt and Inez Stevens, a couple in their 80s, utilize the sun in multiple capacities. Living in a retirement community in Phoenix, Ariz., the Stevens use solar PV and solar thermal panels to charge their electric vehicle, heat 90 percent of their hot water and power half of their duplex. “For us, solar was a practical solution,” Newt tells The Daily Green. “Our primary motivation was economic … And if we produce more than we use, the power company will pay us the difference. We’re seeing a better return on our investment than anything I can get at the banks or stock market.”

Community-Owned Solar
Installing solar on your home or business may not be practical—or desirable. Community-owned solar allows anyone with a utility bill to own solar panels, offset their electric bill, and collect income for the clean energy they produce. “It seems the cost of electricity has only and is only going up, as well as how much electricity we need,” said Jim McDaniels of Colorado Springs, Colo. “I wanted to reduce my electricity cost and help the environment at the same time. I wanted to plan for my future.”

McDaniels began researching online, reading newspaper articles and posting questions on solar energy forums when he discovered community solar developer Clean Energy Collective. He purchased 25 solar electric panels in the Colorado Springs Community Solar Array with a 10-year loan, offsetting 120 percent of his electricity use (the maximum percentage that Colorado Springs allows). “I decided it was a great deal so I went with the maximum and surplus months,” McDaniels said. After his projected 13-year payback period, he’ll receive free electricity – earning an estimated $160,000. “The savings should give me a better chance at an affordable retirement,” McDaniels said.

Do-It-Yourself
For the hands-on, ambitious type like Rich Herr, a retired electrical engineer, constructing a solar system from scratch was the most appealing option. With the help of his friends, Herr built a 20-panel ground-mounted system in his Valparaiso, Ind,. backyard for around $13,000, reports the Post-Tribune.  “For the money I put in it, the return on [the solar system] is better than the return I get on my 401 (k),” Herr said. “I’m not getting money in my hand, that’s just money I don’t have to pay.”

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Electric Industry Seeks Balance between Distributed Generation and the Traditional Grid

by Matthew Rose, Enerdynamics’ Instructor

The industry “topic du jour” in 2013 was that utilities are facing dramatic and potentially disastrous changes to their business. These revelations could be traced to the Edison Electric Institute (EEI) assertion that various “disruptive technologies” including distributed generation and rooftop solar poised a direct assault on the financial viability of utility companies (see EEI, Disruptive Challenges: Financial Implications and Strategic Responses to a Changing Retail Electric Business, January 2013.)money v electricity

EEI stressed concerns that business rules and regulations in place for decades may no longer be relevant to the challenges in supplying and delivering electricity.  So far in 2014, we are seeing less of the dire rhetoric about the industry’s demise and more signs that the industry is addressing its challenges.

The recent meetings of the National Association of Regulatory Utility Commissioners (NARUC) served as the venue for an announced agreement between EEI and the Natural Resources Defense Council (NRDC), one of the industry’s environmental advocacy groups.

The two organizations issued a joint set of recommendations that call for regulators to re-think the traditional utility business model.  The key tenet of the agreement is that customers deserve the opportunity to install new distributed generation technologies as a means of better controlling their energy use while keeping utilities financially whole and able to capture costs to maintain the grid.

A summary of the eight recommendations follows:

  1. The retail electricity distribution business should not be viewed or regulated as a commodity business. Instead it should focus on meeting customers’ energy service needs.
  2. Regulators should consider breaking the link between cost recovery and commodity sales while providing reasonable and predictable non-fuel revenue requirements.
  3. Customers with net metering need to provide reasonable cost-based compensation for relevant utility services used while also being compensated fairly for the services they provide back to the grid.
  4. Utilities deserve assurances that recovery of their authorized non-fuel costs will not vary with fluctuations in electricity use. Customers deserve assurances that costs will not be shifted unreasonably to them from other customers.
  5. Regulators should consider expanding utilities’ earnings opportunities to include performance-based incentives tied to benefits by cost-effective initiatives that improve energy efficiency, integrate clean energy generation, and improve grids.
  6. Effort should be directed to ensure that energy efficiency services reach underserved populations.
  7. A measurable goal should be set forth to help ensure electricity users take advantage of all cost-effective energy efficiency opportunities.
  8. State regulators should be called upon to reaffirm support of enhanced utility investment in ‘smart meters’ and a ‘smart grid.’

It should come as no surprise that the agreement was announced at the NARUC meetings since state regulators are key stakeholders. The rationale behind the agreement suggests utility acknowledgement that renewable and distributed generation technologies are a legitimate, ongoing opportunity for customers. NRDC also seems to recognize that only utilities have the ability to integrate renewables at scale, and no one benefits from a financially strapped company. Hopefully 2014 holds more opportunities to address these utility challenges.

Want to learn more about how the utility business will change as customers build more distributed generation? Attend Enerdynamics’ seminar Distributed Energy, Renewables and Microgrids in Chicago April 7-8, 2014.

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Drop in Electric Demand and Spike in Rates an Ignored Issue in the Midwest

By Bill Malcolm, guest author

When EPA announced new emissions regulations affecting coal power plants, some in the industry predicted resulting power outages. But as coal retirements occur, the situation 467018221looks much less dire. Initial 8,500 MW power shortfall predictions for 2016 in MISO have been revised to be 2,000 MW. The EPA-induced retirements were not that big a deal after all.

Indeed, many Midwest states wondered exactly where the shortfall was since in their state they had a surplus. Here in Indiana, Purdue does its 20-year electricity supply and demand forecast, and it showed a 30% reserve margin this summer and 18% after that.

Indeed, the message from the Purdue study, a recent Department of Energy EIA report, and other sources is that power demands are flat or dropping in most areas of the nation.  As the Purdue study noted, such a trend has never been seen before.

Those few utilities that are short for 2016 need to enter into power purchase contracts to cover their needs beyond what they can generate themselves or have already contracted for in long-term supply agreements. Available sources in the Midwest apparently include several Exelon nuclear plants including the 1,000 MW Exelon Clinton nuclear power plant and the 2,000 MW Exelon Quad Cities nuclear power plant. The company’s CEO said plant closure is an option if the plants can’t be economically operated. Significant amounts of other uncontracted merchant generation also appears to be available.

Accordingly, state regulators should tell their utilities that before we put new steel (gas-fired or otherwise) in the ground, we need to use the power plants that we already have.  No more Kewaunees, please. Kewaunee was a merchant nuclear power plant in Wisconsin that was recently closed by its owner, Dominion, after the company said it could not economically operate the plant. This resulted in a loss of around 600 MW of electricity.

The former utility owners of the plant are both building new gas-fired generation to replace their former purchases from the nuclear power plant when already available merchant generation is sitting underutilized. A better solution may be to provide utilities with incentives to contract for purchased power going forward. Further, increased incentives for demand response and energy efficiency might also be called for to deal with any shortfall.

Energy policy makers need to consider if the current regional surplus and sharply rising rate levels (coupled with flat line demands for the next 20 years) calls for a new strategy: a slow down in new energy investments (generation and transmission) while demand absorbs the current over-supply. In short, energy officials need to focus on the fact that many Midwest states have lost their low cost electricity advantage, and this may reduce the need for ongoing construction. We need strategies to cope with this new reality.

Want to learn more about how the utility business will change as customers reduce loads and build more distributed generation? Attend Enerdynamics’ seminar Distributed Energy, Renewables and Microgrids in Chicago April 7-8, 2014. The last day of the seminar will explore new utility business models that will allow utilities to still be profitable without building new power plants.

About the author: Bill Malcolm is an energy economist based in Indianapolis. He has worked for PG&E, MISO, and ANR Pipeline. He can be reached at billmalcolm@gmail.com.

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