NewEnergyNews: 04/01/2013 - 05/01/2013

NewEnergyNews

Gleanings from the web and the world, condensed for convenience, illustrated for enlightenment, arranged for impact...

While the OFFICE of President remains in highest regard at NewEnergyNews, this administration's position on climate change makes it impossible to regard THIS president with respect. Below is the NewEnergyNews theme song until 2020.

The challenge now: To make every day Earth Day.

YESTERDAY

  • TODAY’S STUDY: Is peak oil demand coming soon?
  • QUICK NEWS, November 21: Online Deniers Falsely Used NASA Study About Antarctic Melt; The EV As A Mini Power Plant; New Energy Price Knocks Coal, Nuclear Out Of The Market
  • THE DAY BEFORE

  • TODAY’S STUDY: How Green Is The Tech World?
  • QUICK NEWS, November 20: The U.S. Is Starting To Get It; New Energy Buying Goes Mainstream; House, Senate To Face Off Over Wind Support
  • THE DAY BEFORE THE DAY BEFORE

  • Weekend Video: Global New Energy To Boom Through 2040
  • Weekend Video: The Power Of The Sun
  • Weekend Video: World’s First Floating Wind Project
  • THE DAY BEFORE THAT

  • FRIDAY WORLD HEADLINE-Three Top Takeaways From The Bonn Climate Summit
  • FRIDAY WORLD HEADLINE-Seven Global New Energy Trends
  • FRIDAY WORLD HEADLINE-World’s First Floating Wind Project Goes Online
  • FRIDAY WORLD HEADLINE-VW Commits $11.8BIL EV Spend In China
  • THE LAST DAY UP HERE

    THINGS-TO-THINK-ABOUT THURSDAY, November 16:

  • TTTA Thursday-Big Thumbs Up For Gore’s ‘Inconvenient Sequel’
  • TTTA Thursday- Trends In Global New Energy Through 2040
  • TTTA Thursday-How Wind Energy Learned To Be Better
  • TTTA Thursday-The Secret To See-Through Solar
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    Founding Editor Herman K. Trabish

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    click image for more info about the Sunstock Solar Festival

    Research Associate and Contributing Editor Jessica R. Wunder

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    Some details about NewEnergyNews and the man behind the curtain: Herman K. Trabish, Agua Dulce, CA., Doctor with my hands, Writer with my head, Student of New Energy and Human Experience with my heart

    email: herman@NewEnergyNews.net

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    Pay a visit to the HARRY BOYKOFF page at Basketball Reference, sponsored by NewEnergyNews and Oil In Their Blood.

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  • TODAY AT NewEnergyNews, November 22:

  • ORIGINAL REPORTING: Will California's 100% renewables goal get through the political process?
  • ORIGINAL REPORTING: What makes a successful utility-led community solar program?

    Tuesday, April 30, 2013

    TODAY’S STUDY: RENEWABLES AND GRID RELIABILITY

    Meeting Load with a Resource Mix Beyond Business as Usual; A Regional Examination of the Hourly System Operations and Reliability Implications for the United States Electric Power System with Coal Phased Out and High Penetrations of Efficiency and Renewable Generating Resources

    Tommy Vitolo, Geoff Keith, Bruce Biewald, Tyler Comings, Ezra Hausman, and Patrick Knight, April 17, 2013 (Synapse Energy Economics)

    Executive Summary

    A “business as usual” strategy for the U.S. electric power industry, wherein the country continues to rely heavily on coal and other fossil fuels to meet its energy needs, is not tenable if we are to achieve substantial reductions in greenhouse gas emissions over the next several decades. In 2011, Synapse prepared a study for the Civil Society Institute,

    Toward a Sustainable Future for the U.S. Power Sector: Beyond Business as Usual 2011 (BBAU 2011), that introduced a “Transition Scenario” in which the United States retires all of its coal plants and a quarter of its nuclear plants by 2050, moving instead toward a power system based on energy efficiency and renewable energy. Synapse’s study showed that this transition scenario, in addition to achieving significant reductions in emissions of CO2 and other pollutants, ultimately costs society less than a “business as usual” strategy—even without considering the cost of carbon. BBAU 2011 projected that, over 40 years, the Transition Scenario would result in savings of $83 billion (present value) compared to the business as usual strategy.

    As part of this lower-cost and low-emissions strategy, the Transition Scenario included large amounts of renewable energy resources with “variable output,” such as wind and solar. Without the inclusion of these resources, it will be difficult or impossible to reduce electric-sector greenhouse gas emissions to the levels necessary to materially mitigate our contribution to dangerous climate change.

    While the need for variable-output resources is well defined, questions have been raised about the impact of large-scale wind and solar integration on electric system reliability.1 In light of this important concern, Synapse paid careful attention to the amount of wind and solar in each region when designing the Transition Scenario for BBAU 2011, taking steps to ensure that the projected regional resource mixes could respond to all load conditions. These steps included: • improving the capability of the transmission system to handle large interregional power transfers; • ensuring that regions with high levels of variable generation also had high levels of flexible generation and capacity; • adding storage capacity in regions with high levels of wind generation;2 • strengthening the capability and flexibility of electric systems through transmission and distribution investments; and • developing robust demand-side management resources.

    Our current study takes the analysis deeper, in order to explore the extent to which the Transition Scenario’s resource mixes for 2030 and 2050 are capable of meeting projected load for each of the ten studied regions—not just during peak demand conditions, but in every hour of every season of the year as consumers require. Using a simplified hourly dispatch model along with empirical load and resource output profiles, we assess the ability of the projected mix in each region to meet load under the varying conditions throughout a day, season, and year. An important limitation of the dispatch model is that it does not include the interregional transfers that were a fundamental part of the resource mix under BBAU 2011, as these have not been defined on an hourly basis. These transfers are an important part of the Transition Scenario for both economic and reliability reasons, and indeed we find that under certain extreme conditions, it is impossible to balance each region in isolation. Nonetheless, our analysis shows that the regional Transition Scenario resource mixes would be capable of meeting load for almost all hours of the year in each region, and that a combination of interregional transfers, local storage, and demand response would be more than adequate to provide a high level of reliability.

    This analysis, along with BBAU, is solely based on today’s existing technology. We do not expect that the optimal sustainable electricity future for the United States will look exactly like our Transition Scenario, as we anticipate that changes in the technology and economics of carbon- free generation and energy storage will produce options that today would seem unachievable. What we demonstrate in this report is that strategies to address one of the most pressing challenges faced by our species and our planet are already not only achievable, but cost effective. Future developments will only improve this potential—it is up to policymakers to make this potential a reality…

    Summary of Findings

    With few exceptions, this study finds that BBAU 2011’s Transition Scenario resource mixes, based entirely on existing technology and operational practices, are capable of balancing projected load in 2030 and 2050 for each region—in nearly every hour of every season of the year. Of course, any viable scenario must be based on much higher levels of reliability, such as a one-outage-in- ten-years standard currently used throughout the United States today. Thus we focus here on any hours with an energy imbalance, either as “unusable surplus” or shortages, to investigate their implications for the feasibility and implementation requirements of the Transition Scenario. This analysis highlights the ways in which interregional cooperation, followed by improvements in technology such as energy storage systems, can provide very high levels of reliability under the Transition Scenario..

    In some cases, additional research and/or modifications to the resource mixes posited by BBAU 2011 may be warranted. Discussed in Section 3 of this report, these cases may include the energy shortfalls observed in the southeast and western regions in the summer and winter seasons, and the energy surpluses that occur in Texas and other regions in the shoulder seasons.

    As noted above, the BBAU resource mix generally should be seen as an illustrative example, and was never identified as an “optimal” scenario. Integration analysis far beyond that presented here will be an integral part of defining the best combination of resources to provide reliable electric service in a carbon-constrained world. The earlier this sort of in-depth analysis is undertaken, the more options will be available for meeting resource adequacy requirements in a cost-effective way.

    This study suggests that it will be feasible to reliably integrate the high levels of zero-carbon energy called for by the Transition Scenario, whether or not this scenario will ultimately provide the most cost effective or elegant nationwide low-carbon energy solution. Achieving this level of integration will likely require incremental improvements in technology and operational practices, including continuation of the current trend toward better interregional coordination. In contrast, the alternative—continuing to rely on increasing combustion of fossil fuels and to bear the growing toll on natural resources and the Earth’s climatepresents far more daunting technical, economic, and social challenges to human and environmental welfare.

    Background

    The “Beyond Business as Usual” Study

    This study relies heavily on a November 2011 Synapse study for the Civil Society Institute titled Toward a Sustainable Future for the U.S. Power Sector: Beyond Business as Usual 2011 (BBAU 2011). BBAU 2011 evaluated and compared two scenarios:

    1) Business as Usual (BAU): Under this scenario, which was based on the U.S. Energy Information Administration’s Annual Energy Outlook (AEO) 2011 modeling work, the country continues to rely on fossil and nuclear generation to meet its energy needs, and electric-sector carbon dioxide (CO2) emissions continue to increase.

    2) Transition Scenario: Under this scenario, the country moves toward a power system based on efficiency and renewable energy, and CO2 emissions are reduced substantially. In the Transition Scenario, all U.S. coal-fired power plants are retired, along with nearly a quarter of the nation’s nuclear fleet, by 2050.

    For BBAU 2011, Synapse estimated the net costs and benefits of the Transition Scenario relative to BAU using a spreadsheet model that accounted for generating capacity, energy, fuel use, costs, emissions, and water use. Synapse performed the analysis on a regional basis, with the country divided into ten regions aggregated from the 22 regions used in AEO 2011 as shown in Figure 3. For each region, Synapse ensured that there was sufficient generating capacity in both the BAU and Transition scenarios, and that there was a generally reasonable mix of energy sources in each region from the perspective of power system operation.

    The analysis for the current study is focused on these same ten regions.

    For most of our technology cost and performance assumptions, we relied on the AEO 2011 data (U.S. EIA 2011). If judged to be more accurate than AEO 2011, other data sources were used for some technologies.

    BBAU 2011 found that the Transition Scenario was significantly less expensive than the BAU Scenario—saving a present value of $83 billion over 40 years. This finding was particularly striking, given that the BAU Scenario included no carbon costs or carbon reductions. If the cost of carbon reductions (or the societal cost of continued emissions) were included in the BAU Scenario, the savings provided by the Transition Scenario would have been far higher.

    Synapse included a large amount of zero carbon, variable output resources—i.e., wind and solar—in the Transition Scenario. In designing this scenario, Synapse paid careful attention to the wind and solar energy potential in each region, and attempted to ensure that the projected resource mixes and interregional transfers were likely to be capable of meeting all load conditions. These steps included: ensuring that regions with high levels of variable generation also had high levels of flexible generation and capacity; adding storage capacity in regions with high levels of wind generation; strengthening the capability and flexibility of electric systems through transmission investments; and including the cost of implementing robust demand response programs. We also noted that trends in system operation—such as consolidation of balancing areas, and increased information sharing—were likely to facilitate the integration of variable resources under either scenario.

    Our present study takes the analysis deeper to explore the extent to which the Transition Scenario resource mixes for 2030 and 2050 meet projected hourly load for each of the ten regions.

    Integrating Variable-Output Generating Resources

    Historically, grid operators have responded to real-time changes in demand by virtually instantaneous control of generating resources to maintain frequency and voltage, and to balance electricity supply and demand. Outside of scheduled maintenance outages and unforeseen events, such as the failure of a generating plant or the loss of a transmission line, operators have assumed that generators are available and reliable, and that demand is fairly predictable— especially if weather conditions are known. Integrating high levels of variable-output resources into the electric grid will require a significant shift in perspective from grid operators (DOE 2008).

    While variable-output generators cannot be directly controlled by the operator, they provide significant benefits including increased price stability and contributions to meeting peak demand (APS 2010). By reducing the usage of fossil fuels to produce electricity, solar and wind resources also provide significant benefits in terms of reducing an electric system’s greenhouse gasses, air pollutants, water usage, and solid waste.

    Solar

    The output of solar resources is dependent on the angle of the sun and the presence of clouds. Based on current scientific knowledge, we are able to forecast the angle of the sun with complete accuracy for centuries into the future. Using satellites and other meteorological tools, we can forecast the presence of clouds at a given location for several hours into the future.

    Solar thermal resources—which use mirrors to focus sunlight to heat steam for a turbine—cannot operate without direct sunlight; however, they are often able to store heat and thereby continue generating electricity for several hours after dusk (DOE 2008). Solar photovoltaic (PV) resources, on the other hand, do not require direct sunlight to generate electricity, but offer no storage ability. They can be mounted in a fixed position, or can change their angle throughout the day to be optimally positioned with respect to the angle of the sun. Intermittent clouds introduce unpredictability for PV facilities, since they produce energy at lower levels if direct sunlight is not available. PV resources do not produce energy after dusk. Despite these constraints, both types of solar resources are beneficial to the electrical system, since optimal operating conditions with direct sunlight often coincide with summer peak demand (MIT 2012).

    Wind

    The output of wind resources is often characterized as being very unpredictable.

    However, while the output of an individual wind turbine at any point in time is extremely difficult to predict, the output of a group of turbines becomes more predictable as the number of turbines and their geographic diversity increase. Individual turbines are sensitive to changes in wind strength which can be localized and short-lived, or broad-scaled and persistent. In contrast, large groups of turbines, such as wind farms, are less subject to local and short-lived variations, and regions with geographically diverse wind resources are even more robust (DOE 2011). Wind resources can also exhibit predictable seasonal and diurnal variations; turbines are typically more likely to run in the early morning and in the winter. Even if the wind is not coincident with peak demand, large- scale patterns provide predictability for balancing purposes (MIT 2012). Additionally, new wind forecasting tools are being developed to help system operators prepare for changes in wind production. The Electric Reliability Council of Texas (ERCOT), working with AWS Truepower and other third parties, has implemented a tool to provide useful 6-hour, 4-hour, and 2-hour-ahead wind power forecasts.

    Flexible Generation

    Today, unpredictable variations in load and in the output of variable-output resources are accommodated through the use of high flexibility resources including storage hydropower and flexible mid-merit and peaking gas units. The Transition Scenario was designed to include sufficient quantities of these resources to meet additional variable output generation. These resource types include: • Storage Hydro - Hydro facilities with reservoirs can be quickly ramped up or down in response to load, which is useful for complementing variable renewable generation (Denholm 2010). Today many of these facilities use their storage capability to generate as much electricity as physically possible during high-load and high-cost daytime hours and little or none overnight. • Combustion Turbine (CT) Peaking Units - Gas-fired combustion turbines can be ramped up or down quickly; however, they are also the least efficient and typically the most expensive generators to run (MIT 2012). Peaking units typically have a very short lead time for construction, and can be installed quickly to help meet expected growth in load or in the need for flexible generation. • Combined-Cycle Combustion Turbine (CCCT) Gas Plants - Gas-fired combined cycle plants provide a valuable mix of high efficiency and operational flexibility to complement variable resources (MIT 2012). They can ramp up and down quickly, and are more efficient and cost-effective to run than CT (peaking) units, as they require less natural gas per MW of output. However, they are more expensive to build and require longer construction lead-time than CTs.

    Energy Storage

    Energy Storage exists today in the forms of pumped hydropower, compressed air storage, flywheels, and batteries. Thermal energy storage in buildings and industrial settings is also used today. Storage provides the ability to both absorb electricity during hours of surplus and to dispatch it as a generator at a later time. Energy storage will always involve some level of losses—for example, it takes more energy to fill a pumped hydro storage reservoir than can be recovered by releasing the water. Today’s advanced storage technologies, such as batteries and flywheels, are relatively expensive and limited in scale, and have thus been applied mostly for specialty applications. However, lower-cost energy storage is an area of very active research and development, including efforts to improve batteries, develop hydrogen production and storage, and implement end-use storage such as thermal storage in buildings, electric water heaters that can respond to system operator controls, and plug-in electric vehicles. Energy storage will almost certainly play an important role in any energy future with higher levels of renewable resources, because storage effectively converts intermittent energy generation to highly flexible dispatchable generation. This study assumed that future storage would have the same cost and efficiency structure as current storage; however, technological advancements will only improve the cost and performance of electrical storage over time.

    Technologies Facilitating Integration

    All of the aforementioned constraints and operating characteristics must be taken into account when integrating generating resources into the grid, in order to maintain the balance of generation of load.

    High levels of variable-output generation (wind and solar) add another layer of complexity to the existing challengs of balancing generation and load in real time while ensuring high levels of reliability. Fortunately, a number of tools are available or under development to help grid operators more easily capture the benefits of variable generation while maintaining a reliable electric system. These tools include electricity and thermal energy storage (described above), extended use of demand response resources, and smart grid applications that can be used for load and frequency balancing (APS 2010; Denholm 2010; MIT 2012). The wider use of electric vehicles will also provide an opportunity for storage and load control to the grid (MIT 2012). As discussed above, geographic diversity and diversity of resource types over larger regions will naturally smooth out some of the variability and unpredictability associated with variable-output resources.

    Finally, improved approaches to using existing, flexible resources such as storage hydro and gas, combined with better forecasting for variable resource output and real-time control, will substantially enhance the ability to accommodate high levels of variable-output renewable energy (Lew et al. 2010).

    Dispatch Model Analysis

    The purpose of this study was to determine whether and in how many hours of the year the BBAU 2011 Transition Scenario resource mixes for 2030 and 2050 resulted in insufficient electricity available to serve load, or an unusable surplus of electricity.

    To perform this analysis, Synapse built a simplified hourly dispatch model based on hourly, regional matching of resources to load. Inter-hourly constraints such as generator ramping limitations are not considered, nor are local transmission constraints. The model does not explicitly model imports and exports between regions. Finally, the model does not consider the need for reserves or any other ancillary service. While a more comprehensive, in-depth dispatch modeling study might accommodate these dynamics and constraints better, we believe the analytical benefits would be illusory; they would be based on limitations and operational practices of today that are not likely to be characteristic of the future study years. On the other hand, the model does not model demand response as a resource. When dispatched, demand response resources allow the systems operator to shift the load curve in order to mitigate or eliminate energy imbalances. This, along with the exclusion of interregional transfers of power, renders the model relatively conservative for this analysis.

    Hourly load data for each region was based on 2010 actual demand, and was adjusted— considering changes in demographics, wealth, and energy efficiency—so that the peak load and annual energy requirements closely matched those in the BBAU 2011 Transition Scenario. Data for these tasks were obtained from FERC 2011, NERC 2012, and U.S. EPA 2011. The generators used in the model came from the BBAU 2011 Transition Scenario. To model the hourly generation of variable resources, a number of National Renewable Energy Laboratory (NREL) studies and data sets were used (NREL PVWatts 2012, GE Energy 2010, and EnerNex Corporation 2011).

    Order of Dispatch

    For purposes of dispatching units in order of economic merit to meet load, generating resources were divided into four major dispatch categories: low-flexibility dispatchable generation (such as baseload nuclear and coal), variable resources, high-flexibility dispatchable generation, and storage. The model simulates unit commitment5 by looking ahead to the upcoming week (168 hours) to determine if coal or biomass resources would be needed to meet demand, or if they would be called on in the ordered dispatch frequently enough to justify being made available for the week. The model then calculates hourly load net of variable resource output to determine how much energy from conventional resources is required, if any. If variable resource output is too high relative to load, the model attempts to absorb the excess energy into available storage. If more energy is required, the model tries to meet load using the following resource ordering, using all available capacity in one before moving on to the next: storage hydro; coal (if available); biomass (if available); energy stored from any surplus in previous hours; CCCT gas, and then peaking gas. If all of those resources, when dispatched, still fail to meet load, any available emergency storage is called upon. The model assumes that, in an actual scenario like this, system operators would have anticipated the need for energy reserves,6 and would have prepared by storing surplus energy in the prior time periods.7 If the emergency storage is not sufficient to meet load, then a shortfall occurs.

    Under realistic operating conditions, it is likely that techniques to shift load such as time-of-use pricing and thermal and chemical storage demand response would be employed, thereby reducing the extent of surpluses and shortages. Any shortfall would be met by importing energy from a neighboring region (as is commonly done for economic and reliability reasons today) or by the use of additional demand response. These resources are not available to the dispatch logic in our model, rendering the dispatch analysis conservative relative to the actual challenged likely to be faced by system operators…

    Conclusions & Recommendations

    With few exceptions, this study finds that BBAU 2011’s Transition Scenario resource mixes, based entirely on existing technology and operational practices, are capable of balancing projected load in 2030 and 2050 for each region—in nearly every hour of every season of the year. Of course, any viable scenario must undergo an extensive suite of analysis, including probabilistic electric system reliability modeling. This study highlights the ways in which interregional cooperation, along with improvements in technology such as energy storage systems, can provide very high levels of reliability under the Transition Scenario.

    The primary limitation of this analysis is the lack of important resource options for balancing load— interregional transfers and demand response—that would almost certainly play a key role in a clean-energy future; and indeed that are in widespread use today, and that were an important element of the BBAU 2011 Transition Scenario. Use of these resources would almost certainly substantially reduce or eliminate regional imbalances, and would make system operations more efficient and economical. On the other hand, the fact that the regions were almost always able to balance load without these resources adds to our confidence in the capability of the Transition Scenario.

    The BBAU 2011 Transition Scenario resource mix was never intended to be an “optimal” scenario. Our expectation is that improvements in technology and operational practices over the coming decades will eclipse the resource options and practices that we can envision today. Nonetheless, we believe that providing a comprehensive, feasible vision for a clean energy future (and highlighting the technological challenges such a future presents) is an important contribution to facilitating this crucial transition. The sooner that we undertake in-depth analyses of resource and integration needs, the more options will be available for meeting future resource adequacy requirements in a cost-effective way.

    Although it is unlikely that BBAU 2011’s Transition Scenario will ultimately provide the most cost effective or elegant nationwide low-carbon energy solution, this study suggests that it will be feasible to reliably integrate the high levels of zero-carbon energy called for by the Transition Scenario. Achieving this future will require only incremental improvements in technology and operational practices, including continuation of the current trend toward better interregional coordination and intermittent resource capacity forecasting.

    Our findings are consistent with other studies, such as MIT 2012, which suggest that much of the U.S. grid could integrate and balance many times the current level of renewables with no additional reliability issues. Recent improvements in both renewable technologies themselves and in the technologies that are used to control and balance the grid have been proceeding at a rapid pace, and the incentives and rewards for success in this area continue to drive substantial progress. In contrast, the alternative—continuing to rely on increasing combustion of fossil fuels to generate electricity, and producing ever-increasing levels of greenhouse gases—is far less feasible, and presents much more daunting technical, economic, and social challenges to human and environmental welfare. In comparison, the challenge of integrating increasing levels of solar and wind power on the U.S. power grids requires only incremental improvements in technology and operational practices.

    QUICK NEWS, April 30: NO CAROLINA SAVES ITS NEW ENERGY STANDARD; SO DAKOTA’S WIND PLAN GOING NATIONAL; NEW YORK STATE SENATE PASSES PV STORAGE SUPPORT

    NO CAROLINA SAVES ITS NEW ENERGY STANDARD REPS Repeal Bill Hits the Wall; H 298 goes down in defeat in sponsor’s own committee

    April 24, 2013 (North Carolina Sustainable Energy Association)

    “In a dramatic turn of events that electrified the room, the North Carolina General Assembly’s Public Utilities and Energy Committee…voted down its Chairman’s own bill, House Bill 298, by a very solid bipartisan vote of 18 to 13. Six Republican members, including three from GOP leadership, joined with others from across the aisle to deliver a resounding defeat to the measure, commonly known as the Renewable Energy and Energy Efficiency Portfolio Standard (REPS) repeal bill…

    “The vote’s outcome and the fact that it occurred in the Committee chaired by the bill’s own sponsor, Chairman Mike Hager, not only helps to secure a path forward for continued economic development in the renewable energy sector, it also showed the strength of the voices from across the state that spoke out against the misguided effort to have North Carolina turn away from a promising clean energy future…”

    “The bill’s failure to make it out of Committee seemed to signal the state’s increasing recognition of the economic virtues behind its current suite of clean energy policies. The lopsided vote which enjoyed a closing of ranks from Democrats and senior Republicans alike set clean energy forward as among an elite group of issues…with true bipartisan appeal and wide popularity among the public…

    “With REPS as a pivotal battleground, clean energy gained further ground…over detractors looking to push a regressive agenda that would have…left ratepayers at the mercy of an electricity market without true choice or competition…The longer the bill was examined and the more time that members had to hear from their constituents and local businesses, the worse it fared…”

    SO DAKOTA’S WIND PLAN GOING NATIONAL 600 Investors in South Dakota’s Premier Community Wind Project

    John Farrell, April 18, 2013 (Institute for Local Self-Reliance)

    “…Brian Minish, CEO of South Dakota Wind Partners [talked] about a community wind project that attracted over 600 local investors. The project was the brainchild of four state organizations rooted in rural South Dakota–the East River Electric Cooperative, South Dakota Farm Bureau, South Dakota Farmers Union and South Dakota Corn Growers. Hoping to broaden ownership in a wind farm project proposed by Basin Electric in Crow Lake, these groups worked with Brian to figure out how to add local investors to the mix.”

    “…The result was a community-based carve out of the 100+ megawatt facility: 7 turbines owned by over 600 farmers and local residents. The turbines were constructed as part of the larger wind farm, and the Wind Partners organization contracted with the cooperative electric utility for operations, maintenance, and purchase of the electricity…[Structured with] the now-expired federal cash grant (in lieu of the Investment Tax Credit) to broaden the opportunity for more local investment…”

    “…[T]he four organizations kick-started the fundraising with $20,000 [each] and shares were sold in increments of $15,000 to other investors…Some were able to invest as equity partners and share in the tax losses generated in the early years, while others just wanted a fixed return on the debt (basically making a fixed interest loan to the project)…

    “…[Much of the success was in] the willingness of Basin Electric to partner with local groups…Unfortunately, the federal cash grant has since expired, making it more difficult to make [similar investments] open to normal investors…[but] Brian keeps searching for ways to open up opportunity for community-based energy projects and overcome barriers, and…SDWP website highlights two other community-based projects, one in New York and one in Texas…SDWP may be a model for community wind…”

    NEW YORK STATE SENATE PASSES PV STORAGE SUPPORT Senate Passes Earth Day Bill Package

    April 23, 2013 (New York State Senate)

    “The New York State Senate…[passed a package of bills including one that promotes] the use of renewable energy…[S2522] would help attract and retain these growing industries by providing a clear incentive for businesses to make capital investments in solar and energy storage manufacturing and development by providing tax credits. It would create new jobs, increase economic investment, reduce harmful emissions, and help New York meet its goals for renewable energy development.”

    “The legislation builds upon Governor Cuomo's expansion of the “NY-Sun” program…by providing a refundable tax credit up to a maximum of $25 million per year for four years to further increase manufacturing, development, and research for solar or battery storage industries. Manufacturers might also be eligible for a 10 percent credit for the expenses associated with conducting research or manufacturing…”

    Monday, April 29, 2013

    TODAY’S STUDY: THE SLOW, STEADY PROGRESS OF NEW ENERGY

    Tracking Clean Energy Progress 2013

    April 2013 (International Energy Agency)

    Key Findings

    Renewable energy and emerging country efforts are lights in the dark as progress on clean energy remains far below a 2°C pathway.

    ■ Governments have the power to create markets and policies that accelerate development and deployment of clean energy technologies, yet the potential of these technologies remains largely untapped. This report demonstrates that for a majority of technologies that could save energy and reduce carbon dioxide (CO2) emissions, progress is alarmingly slow (Table I.1). The broad message to ministers is clear: the world is not on track to realise the interim 2020 targets in the IEA Energy Technology Perspectives 2012 (ETP) 2°C Scenario (2DS). Industry and consumers will provide most of the investment and actions needed, but only with adequate opportunities and the right market conditions.

    ■ The growth of renewable power technologies continued in 2012 despite economic, policy and industry turbulence. Mature technologies – including solar photovoltaic (PV), onshore wind, biomass and hydro – were the most dynamic and are largely on track for 2DS targets. Solar PV capacity grew by an estimated 42%, and wind by 19% compared with 2011 cumulative levels. Investments remained high in 2012, down only 11% from the record level of 2011, but policy uncertainty is having a negative impact, notably on US and Indian wind investments.

    ■ Emerging economies are stepping up efforts in clean energy, but global policy development is mixed. Markets for renewable energy are broadening well beyond OECD countries, which is very positive. This reflects generally rising ambitions in clean energy although developments are not homogenous. For instance, China and Japan strengthened policies and targets for renewables in 2012 while other governments (e.g. Germany, Italy and Spain) scaled back incentives. Industry consolidation continued and competition increased. Partly as a result, investment costs continued to fall rapidly, particularly for onshore wind and solar PV.

    The global energy supply is not getting cleaner, despite efforts to advance clean energy.

    ■ Coal technologies continue to dominate growth in power generation. This is a major reason why the amount of CO2 emitted for each unit of energy supplied has fallen by less than 1% since 1990 (Box I.1). Thus the net impact on CO2 intensity of all changes in supply has been minimal. Coal-fired generation, which rose by an estimated 6% from 2010 to 2012, continues to grow faster than non-fossil energy sources on an absolute basis. Around half of coal-fired power plants built in 2011 use inefficient technologies. This tendency is offsetting measures to close older, inefficient plants. For example China closed 85 GW in 2011 and was continuing these efforts in 2012, and the United States closed 9 GW in 2012.

    ■ The dependence on coal for economic growth is particularly strong in emerging economies. This represents a fundamental threat to a low-carbon future. China and, to a lesser extent India, continue to play a key role in driving demand growth. China’s coal consumption represented 46% of global coal demand in 2011; India’s share was 11%. In 2011 coal plants with a capacity of 55 GW were installed in China, more than Turkey’s total installed capacity.

    ■ Natural gas is displacing coal-fired generation in some countries but this trend is highly regional. Coal-to-gas fuel switching continued in 2012 in the United States, as the boom in unconventional gas extraction kept gas prices low. The opposite trend was observed in Europe, where low relative prices for coal led to increased generation from coal at the expense of gas. In total, global natural gas-fired power generation is estimated to have increased by more than 5% from 2010 to 2012, building on strong growth over the past few years.

    ■ Construction began on seven nuclear power plants in 2012, but meeting 2DS goals will require far more significant construction rates. The policy landscape is starting to stabilise after Fukushima, but some key countries remain undecided. Public opinion seems to be improving in many regions. Most safety evaluations after the Fukushima accident found that existing reactors can continue to operate if safety upgrades are implemented.

    ■ Carbon capture and storage (CCS) technologies – essential in a world that continues to rely heavily on fossil fuels – are mature in many applications but still await their cue from governments. While construction began on two new integrated projects in 2012, eight projects were publicly cancelled. There are signs of commercial interest in CCS technologies – public and private funds spent on CCS projects increased by USD 2.6 billion in 2012 – but CCS will not be deployed in the power and industrial sectors until policies are in place that motivate industry to accelerate demonstration efforts.

    A window of opportunity is opening in transport.

    ■ Hybrid-electric (HEV) and electric vehicles (EV) show very encouraging progress. HEV sales broke the one million mark in 2012, and reached 1.2 million, up 43% from 2011. Japan and the United States continue to lead the market, accounting for 62% and 29% of global sales in 2012 (740 000 and 355 000 vehicles sold). In order to hit 2020 2DS targets, sales need to increase by 50% each year. EV sales more than doubled in 2012, passing 100 000. This rate of sales growth puts EV deployment on track to meet 2DS 2020 targets, which require a 80% annual growth rate. Cumulative government targets for EV sales increased in 2012, with India announcing a total target of 6 million EVs and HEVs on the road by 2020. The target is to be backed by government funding of USD 3.6 billion to USD 4.2 billion, representing more than half of total required investment.

    ■ Fuel economy levels for new passenger light-duty vehicles LDV vary by up to 55% from country to country, demonstrating enormous scope for improving efficiency through policy.Fuel economy improvements accelerate where implementation of fuel economy standards and other policy measures has been scaled up. The pace of improvement in some regions shows the strong potential to bring fuel-saving technologies – most of which are already commercially available – into the market through policy action.

    ■ Global biofuels production – including bioethanol and biodiesel – was static in 2012. Despite strong growth of 7% in biodiesel output in the United States (to 4 billion litres) and Latin America (to 7 billion litres), global volumes remained at roughly 110 billion litres. The slowdown in production growth reflects higher feedstock prices and lower production volumes in key producing regions. This is principally due to extreme weather conditions such as the 2012 drought that compromised the US corn harvest. The events in 2012 highlight the vulnerability of conventional biofuels production to high feedstock prices, which account for 50% to 80% of total production costs.

    ■ The advanced biofuels sector added about 30% of capacity in 2012. More than 100 plants are now operating, including commercial-scale projects, with 4.5 billion litres in total capacity by end-2012. Yet some large-scale projects were cancelled or shelved in 2012; in part, this reflects a lack of adequate policy mechanisms for advanced biofuel deployment in most regions.

    More effort needed in industry, buildings and systems integration.

    ■ Industrial energy consumption could be reduced by around 20% in the medium to long term by using best available technologies (BAT). To meet 2DS goals, it is necessary to optimise production and process techniques, and achieve technological advances, in both OECD and emerging economies. There has been reasonable progress in implementing these changes across industrial sectors but more is needed.

    ■ Several regions stepped up industry energy and emissions-reduction policies in 2012, including Europe, South Africa and Australia. The South African Department of Trade and Industry’s Manufacturing Competitive Enhancement Programme announced a new project that provides USD 640 million over five years from 2012 to support companies that invest in clean technology among other areas of investment. Australia’s Clean Energy Future plan commenced in 2012. The plan includes a carbon price and complementary programmes to support energy efficiency measures in industry, including a USD 10.3 billion Clean Energy Finance Corporation and a USD 1.24 billion Clean Technology programme.

    ■ In 2012 governments implemented several important policy measures to promote energy-efficient buildings and appliances. These include the EU Energy Efficiency Directive (EED), the United Kingdom’s Green Deal and Japan’s Innovative Strategy for Energy and Environment. All of these include measures to address financing barriers to improvements of new and existing building stock. For appliances, the Indian Bureau of Energy Efficiency increased the stringency of energy performance standards for air conditioners by 8%, following introduction of a mandatory labelling programme in 2010. Forty-six countries agreed to phase out incandescent lamps by 2016 under the “en-lighten” initiative, which aims to accelerate a global market transformation to environmentally sustainable lighting technologies. Australia introduced a first-of-a-kind phase-in policy for best available lighting products.

    ■ Technologies for improved systems integration and flexibility, such as stronger and smarter grids, are vital. Demonstration and deployment of smart-grid technologies intensified in 2012, but better data and deployment indicators are required to provide an accurate picture of progress. Smart-grid deployment is starting to provide experience that can be built on. Investment in advanced metering infrastructure, distribution automation and advanced smart-grid applications increased in 2012, to reach USD 13.9 billion. Progress in individual technology areas is important; what matters most is the successful transition of the whole energy system to a clean energy platform. The deployment of smart grids is vital.

    Public investments in energy RD&D must at least triple, as the energy share of research budgets remains low.

    ■ Energy’s share of IEA countries’ total RD&D investments is small; it has varied between 3% and 4% since 2000, after peaking in 1980 when it was more than 10%. Governments have preferred other areas of research, such as health, space programmes and general university research. Defence research receives the most government support, and while it has also seen its share of funding decline, it remains dominant with 30%.

    ■ Nuclear fission accounts for the largest share (24% in 2010) of investment in energy technology RD&D among IEA countries, but renewables, hydrogen and fuel cells have seen the biggest increases since 2000. In particular, spending on renewable energy RD&D has risen sharply over the last decade and now accounts for more than 24% of total public spending on clean energy RD&D. In general, the United States and Europe spend more on RD&D for renewables than the Pacific region or emerging economies.

    Poor quality and availability of data are still serious constraints in tracking and assessing progress.

    ■ A broad concern for much energy data, quality is a particular constraint in emerging economies, for energy-efficiency data in buildings and industry, and in cross-cutting areas such as smart grids and integration of heat and electricity systems. Data that define the energy balance of each country need to be more timely and reliable so that the energy system as a whole can be analysed accurately and so that effective policies and investments can be replicated. RD&D data in emerging economies are still scarce, and data for private RD&D are collected in few countries.

    QUICK NEWS, April 29: PV PRICE TO FLATTEN; WIND GOT FACEBOOK AND GOOGLE FOR IOWA; PV STORAGE BOOM COMING

    PV PRICE TO FLATTEN Solar Summit Slideshow: The PV Module Market; GTM Research Senior Analyst Shyam Mehta provides actionable intelligence for the solar module manufacturing industry.

    Eric Wesoff, April 25, 2013 (Greentech Media)

    “GTM Research Senior Analyst Shyam Mehta…[provided] real-world data points [on the solar market at the recent GTM Solar Summit]…[1] The performance gap between p-type mono-crystalline silicon and multi-crystalline silicon is narrowing…[T]he value proposition for p-type mono continues to deteriorate…P-type might make sense in highly real estate-constrained Japan, but in the long term, Mehta sees n-type mono as a key to maintaining the efficiency advantage…Panasonic, SunPower and Yingli are working on n-type cells.

    “…[Though] 60-cell modules are the current standard but…72-cell, 96-cell, and 128-cell modules available…[L]arge modules can reduce balance-of-system costs by up to 7 cents per watt…The 60-cell modules still have an advantage over larger modules in that they are more rigid, can be carried by one person, and more modules can be fit onto complicated rooftops…[W]e will start to see increasing numbers of larger and different sized modules…”

    “Spot pricing for polysilicon, as well as for cells and modules, has actually risen 5 percent to 15 percent this year…81 percent of ASP reduction over the last two years has come from margin evaporation and polysilicon…Short-term risks to module pricing include the EU anti-dumping decision set for late May or early June, a Chinese tariff on U.S. polysilicon, and the uncertainty of consumables pricing…

    “Larger firms will retire older uncompetitive capacity…[but] if all non-Chinese capacity was to disappear -- there would still be an oversupply in the rest of the world…[A] bankrupt and insolvent Suntech Wuxi continuing to operate while propped up by city government is not consolidation. And because of this ‘messy roadmap’ to rationalization…overcapacity [will continue for] the next twelve to eighteen months…”

    WIND GOT FACEBOOK AND GOOGLE FOR IOWA Sierra Club, utilities spar over Nebraska wind power; Facebook Plans $300m Iowa Data Center

    Richard Piersol, April 24, 2013 (Lincoln Journal Star)

    “The Sierra Club in Nebraska criticized the state's public power utilities for failing to get more wind power online to compete with Iowa, which landed a planned data center for Facebook Inc. in Altoona and increased incentives for Google Inc. that allow it to expand in Council Bluffs.

    “Available wind power was reported among the factors that led to Facebook's decision[and a Facebook spokesman confirmed in email that access to wind power was a factor in its decision]…The Iowa Economic Development Authority board also approved $18 million in tax credits for the Facebook project in the Des Moines suburb. It is expected to create 31 permanent jobs and hundreds of temporary construction jobs. Kearney, Neb., had sought the project.”

    “Facebook hopes to draw 25 percent of data center power from renewable sources by 2015. MidAmerican Energy, which gets a quarter of its energy from wind, will supply power for Facebook and supplies Council Bluffs. MidAmerican is owned by Berkshire Hathaway, Warren Buffett's company…

    “Nebraska ranks fourth for wind potential in the United States, ahead of Iowa, which ranks seventh…[T]he Nebraska Legislature was debating the creation of state wind-energy tax incentives…The Omaha Public Power District, Nebraska Public Power District and [Lincoln Electric System (LES)] all are issuing requests for proposals and buying output…”

    PV STORAGE BOOM COMING PV Storage Market Set to Explode to $19 Billion in 2017; Germany leads Again

    24 April 2013 (IMS Research/IHS Inc.)

    “The worldwide market for PV storage is forecast to grow rapidly to reach $19 billion in 2017, from less than $200 million in 2012, according to a new report…from IMS Research, now part of IHS Inc. (NYSE: IHS).

    “Following the introduction of an energy storage subsidy in Germany, global installations of PV storage systems are forecast to grow by more than 100 percent a year on average over the next five years, to reach almost 7 gigawatts (GW) in 2017 and worth $19 billion. Germany will account for nearly 70 percent of storage installed in residential PV systems worldwide in 2013.However, opportunities also will exist in other regions and applications in the future…”

    “Germany’s long-awaited subsidy for PV storage systems is due to launch on May 1st. IHS predicts that the subsidy will promote rapid growth in the German residential sector, and result in almost 2 gigawatt-hours (GWh) of effective storage capacity being installed during the next five years…[T]he proposed subsidy will reduce the average 20-year cost of a PV system with storage to 10 percent less than a system without it…Previously, the high cost of batteries had more than offset the savings created by increased self-consumption, and PV systems without storage offered a more attractive return…

    “While Germany is forecast to remain one of the largest markets for PV storage, energy storage solutions will also be deployed in a wide range of other regions…[as] Germany will inspire other countries to follow suit, if the scheme proves successful…Storage is also predicted to be used in larger systems, in order to improve the integration of PV into the grid, increase the financial return of PV systems and meet the increasingly demanding connection requirements that some countries are imposing on intermittent electricity sources…Utility-scale PV systems with storage are forecast to grow to more than 2GW annually by 2017…with Asia and the Americas dominating…”

    Saturday, April 27, 2013

    Become A Climate Leader

    To join the climate fight by enlisting in the Climate Reality Leadership Corps, CLICK THROUGH HERE. From ClimateReality via YouTube

    Eye Of The Beholder

    This entry from the wind industry’s video contest asks a good question and offers a courageous answer. From AmericanWindEnergy via YouTube

    Watching Climate Change By Watching Greenland Thaw

    The latest entry in the This Is Not Cool series by Peter Sinclair, originator of the Climate Denial Crock of the Week brand. From yaleclimateforum via YouTube

    Friday, April 26, 2013

    WARMING ENDED CENTURIES OF COOLING IN 1800S

    Analysis of 2,000 Years of Climate Records Finds Global Cooling Trend Ended in the 19th Century; 20th-century warming, researchers say, "reversed" the trend

    April 21, 2013 (National Science Foundation)

    “The most comprehensive evaluation of temperature change on Earth’s continents over the past 1,000 to 2,000 years indicates that a long-term cooling trend--caused by factors including fluctuations in the amount and distribution of heat from the sun, and increases in volcanic activity--ended late in the 19th century…[and] the 20th century ranks as the warmest or nearly the warmest century on all of the continents, except Antarctica [Africa excluded due to insufficient data]…

    “Global warming that has occurred since the end of the 19th century reversed a persistent long-term global cooling trend…[78 authors from 24 countries who make up the 2K Network of the International Geosphere Biosphere Program (IGBP) Past Global Changes (PAGES) project] note in research published in the May 2013 issue of the journal Nature Geoscience that there were regional differences in temperature evolution…”

    “Because long-range cooling was caused by natural factors that continued to exist in the 20th century, the authors argue, the warming of the 20th century makes it more difficult to discount the effects of the increase of greenhouse gases in the global increase of temperatures measured in recent decades…[The] study was not specifically designed to assess the extent to which temperature changes can be attributed to various natural and human-caused factors…

    “The PAGES 2K study aggregates…sources that stand in for actual temperature measurements of past climate…[including] tree-ring analysis, which provides a picture of growth…based in part on air temperatures; tree pollen, which registers changes in dominant species; dome corals, which register sea surface temperatures…; …water molecules contained in ice cores…; and various physical and biological properties of lake sediments…[The] analysis will serve as a benchmark for future studies…”

    WHAT WORLD WIND JUST DID AND CAN DO

    GWEC Global Wind Report – Annual Market Update released…; Wind power surges to new record

    17 April 2013 (Global Wind Energy Council)

    “The Global Wind Energy Council[GWEC]...Annual Market Update…[is] a comprehensive snapshot of the global wind industry at the end of 2012, along with a 5-year forecast out to 2017. Although policy uncertainty in the main OECD markets is a cause for concern, strong markets in China, India and Brazil, as well as in new markets in Latin America, Africa and the rest of Asia will drive global growth…”

    [Steve Sawyer, Secretary General, GWEC:] “Wind power may be variable, but the greatest threat to the continued stable growth of the industry is the variability and unpredictability of the politicians…[but] the fundamentals which have driven wind power to date are still in place: energy security, price stability, local economic development, climate change mitigation and local air and water pollution issues; and wind is now competitive in an increasing number of markets, despite fossil fuel subsidies…”

    “Record installations in the United States and Europe led global installations of 44.8 GW of new wind power globally in 2012, 10% more than was installed in 2011. Global installed capacity has now reached 282.5 GW, a cumulative increase of almost 19%. The forecast is for a modest downturn in 2013, however, followed by a recovery in 2014 and beyond; with global capacity growing at an average rate of 13.7% out to 2017, and global capacity nearly doubling to 536 GW.”

    “The US regained the #1 spot for global markets in 2012 for the first time since 2009, eking out China by 164 MW…[Due to PTC turmoil] the US market will drop precipitously in 2013…with substantial recovery expected in 2014. Europe’s record installations in 2012 are unlikely to be repeated in 2014, as a result of policy uncertainty… China, the world’s largest market with over 75 GW of installed capacity…[is targeting] 18 GW of installations in 2013…[India is expected] to return to growth in 2014. Brazil continues to lead the Latin American market, and may surpass 2 GW of annual installations in 2013; and both Mexico and Canada are expected to grow substantially…

    “There are also hundreds of MW under construction in South Africa, with another 500 MW expected to come to financial close this year, leading a surge in installations in sub-Saharan Africa which began in Ethiopia in 2012. In Asia, Pakistan, Mongolia, the Philippines and Thailand are all expected to see significant installations in 2013 and beyond…”

    WHERE WORLD SOLAR IS GOING

    Four Must-See Charts on the Future of the Global Solar Market; Who will be left standing when the dust settles?

    Stephen Lacey, April 23, 2013 (Greentech Media)

    “…[U]nexpected growth in global demand, particularly in European markets, helped keep many producers afloat..[until], in 2010 and 2011, we saw a surge of new manufacturing capacity -- much of it driven by China -- that created the structural oversupply faced by the industry today…[T]he delayed shake-out in the industry is now well underway…

    “In 2010, when the period of irrational growth began in solar manufacturing, there were 357 active module producers…By the end of this year, that number will be down to 145. And in 2016, it will drop below one hundred…But global demand continues to grow as new markets open up and installation costs drop. Already, panel prices have begun to level out as the Chinese and Japanese markets speed up. At the end of 2013 and into 2014, the market will begin to rationalize and prices actually may start to rise…”

    “…[But] the average sales price in a ‘stable’ market for a Tier-1 Chinese module [will still only get to] $0.47 per watt…After a long period of dominance, Europe finally cedes its leadership to Asia in 2013 and 2014. The U.S. also becomes a major player, representing 18 percent of total global installations. The Latin American, Middle Eastern and North African markets also start to show great promise in 2014 through 2016.

    “While the annual growth many not be as strong, the global market will still total more than 50 gigawatts in 2016 -- a massive jump from the 6.4 gigawatts installed in 2009 when GTM Research first predicted the shake-out would occur.”

    EU OCEAN ENERGY LOOKS TO 2030 W/SLOWER GROWTH THAN HOPED

    EU push for ocean energy set to fall short

    March 30, 2013 (Reuters via Business Recorder)

    “Europe's wave and tidal power technology is likely to disappoint EU expectations for 2020 and take over a decade to contribute to energy supply in a significant way, even though it is chalking up rapid growth and drawing in big industrial investors…[and secured in the last year] an estimated few hundred million euros from companies such as Siemens and Vattenfall.

    “It is making fast progress from prototype devices toward full-scale sea trials and promises to be more reliable than many types of renewable power that depend on the weather. But those numbers are far less than European Union expectations for 8.5 billion euros ($11.3 billion) of investment and generation capacity of 3.6 gigawatts installed by 2020…[Grid-connected capacity from wave and tidal in the UK, though still modest at 5.6 MW, has risen 90 percent since March last year and is expected to rise to 11 MW this year with the connection of at least seven new devices. Some utilities like Vattenfall want expansion of grid capacity before investing]…”

    “The technology, like other renewables, needs government financing help to reach commercial scale and…[become] cost efficient…Government financing is hard to come by while…governments are cutting spending…[and] its development costs are still far higher than for other renewables, including offshore wind power…[ There technical challenges, the need to build grid infrastructure and control systems, and cost issues. Current estimates for the levelised cost are 0.38-0.48 pounds/KWh for wave energy and 0.29-0.33 pounds/KWh for tidal, compared with 0.09-0.10 pounds/KWh for nuclear and offshore wind]…

    “Siemens, which increased its stake in UK developer Marine Current Turbines last month, sees double-digit annual growth rates for marine current renewables to 2020 from virtually zero now and expects it ultimately to meet 3 to 4 percent of global energy demand…Most experts expect the first large-scale commercial projects of 1 MW or more to emerge by 2016 or 2017 and ocean energy to start contributing to the EU power mix between 2025 and 2030…[T]he next challenge is to get to five-to-10 MW arrays and then move to hundreds of megawatts…”

    Thursday, April 25, 2013

    UK TELLS TEXAS TO GET REAL ON CLIMATE

    UK to Texas: Get serious about climate change

    James Jeffrey, April 23, 2013 (Houston Business Journal)

    “The United Kingdom views climate change as an economic and national security risk and would like to see Texas take more action on the issue, according to a representative from the British Consulate in Houston…[in testimony on the U.K.’s position…following passage last week of House Bill 788 in which an amendment to include reference to climate change was defeated…

    “…The U.K. is the largest foreign investor in the U.S., with more than $400 billion invested, and is the largest foreign investor in the Lone Star State, with U.K.-owned businesses responsible for more than 70,000 jobs in Texas…”

    “According to assessments by the U.K. government, global risks posed by climate change include…Long-term drag on growth and a less stable economy…More intense, less predictable price shocks…Disruptions to global supply chains…Heightened political tensions and migration linked to water insecurity…Increased risks of instability and conflict in fragile states…[T]he U.K. considers it a priority for policy makers to address the impacts of a changing climate…”

    [Cynthia Conner, policy adviser on energy, environment and resource security, Houston British Consulate:] “The global nature of trade, supply chains and commodity prices means that we will all be affected by the impacts of climate change…The U.K. understands that climate change is a sensitive issue…But it would like to see more comprehensive action in the U.S….[and] welcomes collaboration with Texas in addressing this global issue.”

    GOOGLE CALLS ON UTILITIES TO GROW NEW ENERGY

    Google Sees Renewable Energy Tariffs as New Utility Product

    Andrew Herndon, April 19, 2013 (Bloomberg News)

    “Google Inc. (GOOG), which has invested more than $1 billion in renewable energy projects and buys wind- generated electricity, said utilities should offer large customers more options for using clean power…[through] a new tariff structure that allows companies to request and purchase renewable energy directly from their utilities…

    “Google, the operator of the world’s largest Internet search engine, is funding projects ranging from rooftop solar power at homes to desert solar-thermal systems and two of the world’s largest wind farms. It also buys wind power from two facilities in Oklahoma and one in Iowa and has installed solar panels on its corporate headquarters…[but it has become complicated] because Google resells the electricity on the wholesale market after retiring the associated green-energy credits…”

    “…Duke Energy Corp. (DUK), the largest U.S. utility owner, is developing a program in North Carolina that would sell clean energy directly to large customers that opt into the service without raising prices for other ratepayers. The proposal will be filed with state regulators within 90 days…Google plans to participate…[along with] a $600 million expansion of its data center in Lenoir, North Carolina…

    “…Utilities owned by Dominion Resources Inc. and NV Energy Inc. (NVE) have introduced similar proposals…[More than 60 percent of Global Fortune 500 companies have renewable energy or greenhouse gas reduction targets, though utilities aren’t doing enough to satisfy demand, Google said]…”

    YOKO ONO – ‘GIVE CLEAN WATER A CHANCE’

    Let’s Give Clean Water a Chance

    Yoko Ono, April 23, 2013 (EcoWatch)

    “…[Through] my involvement with the fight against fracking in New York, I’ve seen once again that change is possible…from people banding together…[to] stop the injustices to our environment that fracking and other dirty energy production causes…Together, day and night, we are making our best effort to communicate the truth of what threatens our environment and threatens the health of our families, the safety and economic prosperity of our communities, and our quality of life…Because of this grassroots resurgence, we have seen amazing things transpire. And it is not about to stop.

    “The anti-fracking movement is an organic one, driven by people’s experiences and valid concerns about having a harmful and contaminating practice invade their land, homes and communities. For me, it started when gas companies visited my town in upstate New York to pitch a natural gas pipeline that would provide infrastructure for future fracking.”

    “I did not want to see my land destroyed. I also felt a responsibility to stop this from happening to other people, other states and throughout the world. So nearly 150 fellow artists joined the Artists Against Fracking (AAF) as soon as it was created. AAF, in return, joined thousands of others in the cause and have become the voice of truth that industry refuses to speak.

    “It is an electrifying moment when you realize that together we have the power to change the world for the better. A world that will sustain clean water to start off with, and will create a vibrant economy while protecting the precious resources we’ve been blessed with…Imagine such a society. Let’s make it happen.”

    E-RECYCLING ON THE RISE

    …2013 Special Gadgetology Report: Who is Recycling Electronics and Buying Green Gadgets?

    Andrew Eisner, April 17, 2013 (Retrevo)

    “…Almost three years ago Retrevo ran a survey that indicated over 60% of the households across the country weren’t recycling their electronics. The most common reason cited was they just didn’t get around to it…{L]aziness or “not getting around to it,” is still the most common excuse but…it’s a lot smaller percentage of people who say they aren’t recycling electronics. The younger generation, including those under 30 are the worst offenders with 17% or them saying they just don’t get around to it compared to 8% of those over 30.

    “Many municipalities provide households with recycling containers for paper products, glass and metal, and even compost. To recycle electronics you have to find a location that will accept them. The third most common excuse for not recycling, after “don’t get around to it,” and “don’t know where to take them,” is the fact that recycling is not available. In many cases this is being addressed by resellers and manufacturers who are stepping up and providing recycling services…”

    “There are some good rating systems available like Energy Star and EPEAT that offer consumers a way to tell which products are more environmentally friendly than others. Unfortunately, in this study we found a large percentage of respondents indicating they don’t pay much attention to energy ratings when purchasing a product…Although a large percentage (67%) of respondents indicated that they trust “green” ratings like Energy Star, only 42% of respondents say they use them when deciding what to buy. That percentage drops to 35% for the younger generation…

    “We were encouraged, to see how many more respondents indicated they now recycle their electronics but we also feel there is a lot of room for improvement in both recycling and buying greener products. Perhaps if more consumers where aware about the harm improperly disposed gadgets can bring to humans and the environment, more people would be “greener” with gadgets; buying ones with higher “green” ratings and recycling them when done using them.”

    Wednesday, April 24, 2013

    TODAY’S STUDY: THE FORCES OF NEW ENERGY GATHERING AGAINST UTILITIES

    Disruptive Challenges: Financial Implications and Strategic Responses to a Changing Retail Electric Business

    January 2013 (Edison Electric Institute)

    Executive Summary

    Recent technological and economic changes are expected to challenge and transform the electric utility industry. These changes (or “disruptive challenges”) arise due to a convergence of factors, including: falling costs of distributed generation and other distributed energy resources (DER); an enhanced focus on development of new DER technologies; increasing customer, regulatory, and political interest in demandside management technologies (DSM); government programs to incentivize selected technologies; the declining price of natural gas; slowing economic growth trends; and rising electricity prices in certain areas of the country. Taken together, these factors are potential “game changers” to the U.S. electric utility industry, and are likely to dramatically impact customers, employees, investors, and the availability of capital to fund future investment. The timing of such transformative changes is unclear, but with the potential for technological innovation (e.g., solar photovoltaic or PV) becoming economically viable due to this confluence of forces, the industry and its stakeholders must proactively assess the impacts and alternatives available to address disruptive challenges in a timely manner.

    This paper considers the financial risks and investor implications related to disruptive challenges, the potential strategic responses to these challenges, and the likely investor expectations to utility plans going forward. There are valuable lessons to be learned from other industries, as well as prior utility sector paradigm shifts, that can assist us in exploring risks and potential strategic responses.

    The financial risks created by disruptive challenges include declining utility revenues, increasing costs, and lower profitability potential, particularly over the long-term. As DER and DSM programs continue to capture “marketshare,” for example, utility revenues will be reduced. Adding the higher costs to integrate DER, increasing subsidies for DSM and direct metering of DER will result in the potential for a squeeze on profitability and, thus, credit metrics. While the regulatory process is expected to allow for recovery of lost revenues in future rate cases, tariff structures in most states call for non-DER customers to pay for (or absorb) lost revenues. As DER penetration increases, this is a cost-recovery structure that will lead to political pressure to undo these cross subsidies and may result in utility stranded cost exposure.

    While the various disruptive challenges facing the electric utility industry may have different implications, they all create adverse impacts on revenues, as well as on investor returns, and require individual solutions as part of a comprehensive program to address these disruptive trends. Left unaddressed, these financial pressures could have a major impact on realized equity returns, required investor returns, and credit quality.

    As a result, the future cost and availability of capital for the electric utility industry would be adversely impacted. This would lead to increasing customer rate pressures. The regulatory paradigm that has supported recovery of utility investment has been in place since the electric utility industry reached a mature state in the first half of the 20th century. Until there is a significant, clear, and present threat to this recovery paradigm, it is likely that the financial markets will not focus on these disruptive challenges, despite the fact that electric utility capital investment is recovered over a period of 30 or more years (i.e., which exposes the industry to stranded cost risks). However, with the current level of lost load nationwide from DER being less than 1 percent, investors are not taking notice of this phenomenon, despite the fact that the pace of change is increasing and will likely increase further as costs of disruptive technologies benefit further from scale efficiencies.

    Investors, particularly equity investors, have developed confidence throughout time in a durable industry financial recovery model and, thus, tend to focus on earnings growth potential over a 12- to 24-month period.

    So, despite the risks that a rapidly growing level of DER penetration and other disruptive challenges may impose, they are not currently being discussed by the investment community and factored into the valuation calculus reflected in the capital markets. In fact, electric utility valuations and access to capital today are as strong as we have seen in decades, reflecting the relative safety of utilities in this uncertain economic environment.

    In the late 1970s, deregulation started to take hold in two industries that share similar characteristics with the electric utility industry—the airline industry and the telecommunications industry (or “the telephone utility business”). Both industries were price- and franchise-regulated, with large barriers to entry due to regulation and the capital-intensive nature of these businesses. Airline industry changes were driven by regulatory actions (a move to competition), and the telecommunications industry experienced technology changes that encouraged regulators to allow competition. Both industries have experienced significant shifts in the landscape of industry players as a result.

    In the airline sector, each of the major U.S. carriers that were in existence prior to deregulation in 1978 faced bankruptcy. The telecommunication businesses of 1978, meanwhile, are not recognizable today, nor are the names of many of the players and the service they once provided (“the plain old telephone service”). Both industries experienced poor financial market results by many of the former incumbent players for their investors (equity and fixed-income) and have sought mergers of necessity to achieve scale economies to respond to competitive dynamics.

    The combination of new technologies, increasing costs, and changing customer-usage trends allow us to consider alternative scenarios for how the future of the electric sector may develop. Without fundamental changes to regulatory rules and recovery paradigms, one can speculate as to the adverse impact of disruptive challenges on electric utilities, investors, and access to capital, as well as the resulting impact on customers from a price and service perspective. We have the benefit of lessons learned from other industries to shift the story and move the industry in a direction that will allow for customers, investors, and the U.S. economy to benefit and prosper.

    Revising utility tariff structures, particularly in states with potential for high DER adoption, to mitigate (or eliminate) cross subsidies and provide proper customer price signals will support economic implementation of DER while limiting stress on non-DER participants and utility finances. This is a near-term, must-consider action by all policy setting industry stakeholders.

    The electric utility sector will benefit from proactive assessment and planning to address disruptive challenges. Thirty year investments need to be made on the basis that they will be recoverable in the future in a timely manner. To the extent that increased risk is incurred, capital deployment and recovery mechanisms need to be adapted accordingly. The paper addresses possible strategic responses to competitive threats in order to protect investors and capital availability. While the paper does not propose new business models for the industry to pursue to address disruptive challenges in order to protect investors and retain access to capital, it does highlight several of the expectations and objectives of investors, which may lead to business model transformation alternatives…

    Disruptive Threats—Strategic Considerations

    A disruptive innovation is defined as “an innovation that helps create a new market and value network, and eventually goes on to disrupt an existing market and value network (over a few years or decades), displacing an earlier technology. The term is used in business and technology literature to describe innovations that improve a product or service in ways that the market does not expect, typically first by designing for a different set of consumers in the new market and later by lowering prices in the existing market.”

    Disruptive forces, if not actively addressed, threaten the viability of old-line exposed industries. Examples of once-dominant, blue chip companies/entities being threatened or succumbing to new entrants due to innovation include Kodak and the U.S. Postal Service (USPS). For years, Kodak owned the film and related supplies market. The company watched as the photo business was transformed by digital technology and finally filed for bankruptcy in 2012.

    Meanwhile, the USPS is a monopoly, government-run agency with a mission of delivering mail and providing an essential service to keep the economy moving. The USPS has been threatened for decades by private package delivery services (e.g., UPS and FedEx) that compete to offer more efficient and flexible service. Today, the primary threat to USPS’ viability is the delivery of information by email, including commercial correspondence such as bills and bill payments, bank and brokerage statements, etc. Many experts believe that the USPS must dramatically restructure its operations and costs to have a chance to protect its viability as an independent agency.

    Participants in all industries must prepare for and develop plans to address disruptive threats, including plans to replace their own technology with more innovative, more valuable customer services offered at competitive prices. The traditional wire line telephone players, including AT&T and Verizon, for example, became leaders in U.S. wireless telephone services, which over time could make the old line telephone product extinct. But these innovative, former old-line telephone providers had the vision to get in front of the trend to wireless and lead the development of non-regulated infrastructure networks and consumer marketing skills. As a result, they now hold large domestic market shares. In fact, they have now further leveraged technology innovation to create new products that expand their customer offerings…

    Financial Implications of Disruptive Forces

    As discussed previously, equity investors expect and will value an equity security based upon growth attributes as a major component of the expected total return investors require. Growth in utility earnings has historically been realized by a combination of increased electricity sales (volume), increased price per unit of sales (higher rates), and/or expanded profit margins on incremental revenues achieved between rate cases reflecting the realization of operational/overhead efficiencies. Earnings levels and growth are also impacted by changing costs of capital due to market forces—this is currently a depressant on utility earnings per share (EPS) levels due to the sector-wide decline in authorized returns on equity (ROE) realized over the last several years.

    First, let’s review the current climate for the utility sector. While valuations are near all-time highs, the headwinds facing the sector are significant. Concerns start with the anemic electricity demand, which has been primarily impacted by the overall economic climate but also impacted by demand-side efficiency programs and the emergence of DER. Next, there is the need to deploy capital investment at almost twice the rate of depreciation to enhance the grid and address various regulatory mandates. Soft electricity demand plus increasing capital investment lead to rate increase needs and the investment uncertainty created by a future active rate case calendar. While sell side analysts are expecting EPS growth of 4 percent to7 percent overall for the regulated sector, this is likely to be quite challenging. If investor expectations are not realized, a wholesale reevaluation of the sector is likely to occur.

    So, what will happen when electricity sales growth declines and that decline is not cyclical but driven by disruptive forces, including new technology and/or the further implementation of public policy focused on DSM and DER initiatives? In a cost-of-service rate-regulated model, revenues are not directly correlated to customer levels or sales but to the cost of providing service. However, in most jurisdictions, customer rates are a function of usage/unit sales. In such a model, customer rate levels must increase via rate increase requests when usage declines, which from a financial perspective is intended to keep the company whole (i.e., earn its cost of capital). However, this may lead to a challenging cycle since an increase in customer rates over time to support investment spending in a declining sales environment (due to disruptive forces) will further enhance the competitive dynamics of competing technologies and supply/demand efficiency programs. This set of dynamics can become a vicious cycle (See Exhibit 3) that, in the worst-case scenario, would leave few(er) customers remaining to support the costs of a large embedded infrastructure system, some of which may be stranded investment but most of the costs will continue to be incurred in order to manage the flows between supply and customers.

    When investors realize that a business model has been stung by systemic disruptive forces, they likely will retreat. When is the typical tipping point when investors realize that the merits of the investment they are evaluating or monitoring has been forever changed? Despite all the talk about investors assessing the future in their investment evaluations, it is often not until revenue declines are reported that investors realize that the viability of the business is in question.

    An interesting example isthe story of RIM, the manufacturer of the Blackberry handheld information management tool. From its public start in the 1990s thru 2008, RIM was a Wall Street darling. Its share price was less than $3 in 1999 and peaked at $150 in 2008. The company started to show a stall in sales in 2011, and, now, despite a large cash position and 90 million subscribers, the market is questioning RIM’s ability to survive and RIM’s stock has plummeted from its high.

    What happened to this powerful growth company that had dominant market shares in a growth market? The answer is the evolution of the iPhone, which transformed the handheld from an email machine to a dynamic Internet tool with seemingly unlimited applications/functionality. When the iPhone was first released in 2007, it was viewed as a threat to RIM, but RIM continued to grow its position until the introduction of the iPhone 4 in June 2010. The iPhone 4, which offered significant improvements from prior versions, led to a retreat in RIM’s business and caused a significant drop in its stock price.

    It seems that investors have proven to be reasonably optimistic on selected industries even though the competitive threat is staring them head-on. However, if we can identify actionable disruptive forces to a business or industry, then history tells us that management and investors need to take these threats seriously and not wait until the decline in sales and revenues has commenced to develop a new strategy or, in the case of investors, realize their loss.

    As discussed above, investors in the utility sector seek increased certainty (or less risk) than in other industries and have confidence in the consistent application of ratemaking recovery models to provide a lower degree of investment risk. As a result of this confidence, when instances have occurred in the past that have not provided consistent application of expected cost recovery models, investors have responded and have caused significant adverse impact on entities’ ability to raise incremental capital.

    But, with the exception of the California energy crisis in the early 2000s, these events reflected embedded cost issues that had defined exposures and time frames. Disruptive changes are a new type of threat to the electric utility industry. Disruptive changeslead to declining customer and usage per customer levels that cannot be easily quantified as to the potential threat posed to corporate profitability. This type of problem has not been faced before by the electric industry and, thus, must be understood asto the strategic issues and alternatives that are raised.

    The new potential risk to utility investors from disruptive forces is the impact on future earnings growth expectations. Lost revenues within a net metering paradigm, for instance, are able to be recovered in future rate cases. However, without a shift in tariff structures, there is only so much of an increase that can be placed on remaining non-DER customers before political pressure is brought to bear on recovery mechanisms. Once the sustainability of the utility earnings model is questioned, investors will look at the industry through a new lens, and the view from this lens will be adverse to all stakeholders, including investors and customers. While we do not know the degree to which customer participation in DER and behavior change will impact utility earnings growth, the potential impact, based upon DER trends, is considerable (as stated earlier, industry projections propose that 33 percent of the market will be in the money for DER by 2017, assuming current tax and regulatory policies).

    Today, regulated utilities have seen allowed returns on equity decline to around 10 percent, a multi-decade low point, as a result of declining interest rates (See Exhibit 4). The cost of equity has also been growing. However, the risks in the business have never been higher, due to increasing customer rate pressures from capital expenditures required to upgrade the grid and address environmental mandates, inflation, low/negative demand growth from active customers, and the threat of load lost due to the rapid development of DER and disruptive forces. The impact of declining allowed returns and increasing business risk will place pressure on the quality and value of utility investments. How large of an impact on investment value will be a function of the impact of disruptive forces described herein. But, lower stock prices will likely translate into lower levels of capital spend, lower domestic economic growth, and fewer grid enhancements…

    Summary

    While the threat of disruptive forces on the utility industry has been limited to date, economic fundamentals and public policies in place are likely to encourage significant future disruption to the utility business model.

    Technology innovation and rate structures that encourage cross subsidization of DER and/or behavioral modification by customers must be addressed quickly to mitigate further damage to the utility franchise and to better align interests of all stakeholders.

    Utility investors seek a return on investment that depends on the increase in the value of their investment through growth in earnings and dividends. When customers have the opportunity to reduce their use of a product or find another provider of such service, utility earnings growth is threatened. As this threat to growth becomes more evident, investors will become less attracted to investments in the utility sector. This will be manifested via a higher cost of capital and less capital available to be allocated to the sector.

    Investors today appear confident in the utility regulatory model since the threat of disruptive forces has been modest to date. However, the competitive economics of distributed energy resources, such as PV solar, have improved significantly based on technology innovation and government incentives and subsidies, including tax and tariff-shifting incentives. But with policies in place that encourage cross subsidization of proactive customers, those not able or willing to respond to change will not be able to bear the responsibility left behind by proactive DER participating customers. It should not be left to the utility investor to bear the cost of these subsidies and the threat to their investment value.

    This paper encourages an immediate focus on revising state and federal policies that do not align the interests of customers and investors, particularly revising utility tariff structures in order to eliminate cross subsidies (by non-DER participants) and utility investor cost-recovery uncertainties. In addition, utilities and stakeholders must develop policies and strategies to reduce the risk of ongoing customer disruption, including assessing business models where utilities can add value to customers and investors by providing new services.

    While the pace of disruption cannot be predicted, the mere fact that we are seeing the beginning of customer disruption and that there is a large universe of companies pursuing this opportunity highlight the importance of proactive and timely planning to address these challenges early on so that uneconomic disruption does not proceed further. Ultimately, all stakeholders must embrace change in technology and business models in order to maintain a viable utility industry.