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Disruptive Technology Hits Electric Industry

June 23, 2013 by White House Chronicle 6 Comments

If you are reading this by electric light, you are connected to the electric grid Unless, that is, you are one of an infinitesimal number of home owners who installed solar panels.
 
The penetration of solar panels may be statistically insignificant today, but to the electric industry these panels, and other self-generating schemes, are like dry rot: a threat to the whole edifice.
 
It is not just those panels that are beginning to disrupt the electrical grid, but the whole panoply of alternative technology; wind, geothermal heat, micro-hydro turbines and scattered natural gas turbines all fit into a new category of electric generation known as “distributed generation.”
 
The change is so threatening to the investor-owned electric utilities and their not-for-profit colleagues in the public power sector that it has begun to dominate discussions on the Web and wherever utility executives gather.
 
Early this year the Edison Electric Institute (EEI), which represents the investor-owned utilities that provide 70 percent of U.S. electricity, issued a white paper discussing the disruptive changes that are beginning to threaten the old electric paradigm. The theme of change also dominated the EEI annual convention in San Francisco earlier this month, with CEOs talking about a “new business model,” although they were hard put to say what this will be.
 
The root cause of the problem is that the new entrants into generating treat the grid as kind of open marriage: there when it suits them. A home owner, might be self-sufficient in electricity, and even generate enough to sell a small portion back, to the grid 90 percent of the time; but during prolonged bad weather, or if the home system is down for maintenance, that home owner expects to flip a switch and go back on the grid. The local utility, all the while, has been standing by hoping to sell that home owner a few watts until the home system returns to power.
 
This applies even more so to large users of electricity, including factories and big retailers. Many of the factory customers generate nearly all of their own electricity already and big retailers are getting in the game. Walmart is covering its store roofs with solar cells. McDonalds has eyed self-generating for years, but not without the comforting assurance that the grid will always be there.
 
All of this distorts the financial as well as the physical infrastructure of the utility industry and produces social problems as well. Ted Craver, CEO of Edison International, the parent company of Southern California Edison, told the EEI conference that as California is “ground zero” for rooftop solar, you have to ask “are you creating a system of those who have means for self- generating and shifting the burden to the have-nots? It is a social fairness question.”
 
The system is also skewed, Craver noted, by subsidies for alternative generation. He called for a flexible system that allows for these new realities.
 
Another threat, according to Tom Fanning, CEO of the giant Southern Company, comes to the ability of utilities — one of the most capital-intensive industries is the world– to raise money. “Our industry raises about $90 billion a year and we need policies that support that,” he said.
 
There are other problems facing the electricity industry, which are cataloged in an amusing and readable book by economist Steven Mitnick, “Lines Down.” While Mitnick is more optimistic about the future of the grid than many, he says it needs fixing. It has been starved of investment and needs upgrading, particularly hardening against the storm outages that are standard in America but not in Europe, Japan and South Korea.
 
The future of the grid is not in the hands of the utilities alone, but also the regulators, federal and state, and politicians. That means that the new paradigm may be a long time in coming, while another aspect of the U.S. infrastructure deteriorates. — For the Hearst New York Times Syndicate

 
 
 
 
 
 
 
 

Filed Under: King's Commentaries Tagged With: alternative energy, disruptive technology, Edison Electric Institute, Edison International, electric utility industry, solar energy, Southern Company, Steven Mitnick, Ted Craver, Tom Fanning

Stand Up to NIMBY — and Create Jobs

February 7, 2011 by White House Chronicle 2 Comments

In Britain, they call it “DADA.” It means Decide. Announce. Defend. Abandon.

In America we call it “NIMBY” — “not in my back yard.”

It applies to all kinds of infrastructure construction, from airports to roads. But it is electric and gas utilities that feel the brunt of local opposition.

These localized forces of “no” have caused the buildup of a substantial backlog of infrastructure projects, not only for sexy green-energy technologies but also for the traditional needs of energy production and distribution — pipelines, power lines, replacement of aging equipment and the construction of new facilities to meet new loads and move the energy infrastructure into the 21st century.

It also includes old-fashioned technology — meters, switches, transformers — to get new green electricity to the consumer.

A new study, from a group advocating upgrading energy facilities, says the pent-up need for utilities to start these projects is so great that if the impediments can be dealt with, 250,000 jobs can be created almost immediately, without action from Congress or a raid on the federal treasury.

The group, Build America Now, is headed by a veteran utility consultant Steven Mitnick, who has advised the governor of New York, headed his own electric transmission company, and was a senior strategist in the electric and gas practice of McKinsey & Co., the consulting firm.

According to Mitnick, the backlog buildup in the utility sector could be a bonanza for the Obama administration. He calculates that if the Gulliver of energy projects can be freed from the Lilliputian ties of local regulatory opposition, unemployment would be reduced by two-tenths of 1 percent. Not inconsiderable.

Mitnick told me the beauty of pushing these utility projects is that they would be financed by the utilities and “they really are shovel-ready.” Whereas Obama’s much-discussed green jobs will one day pay off, Mitnick believes these more traditional jobs — which he calls “backbone” jobs — are in the starter’s gate.

The study provides lists of utilities and gas companies and their projects that stretch across the energy field. In essence, Mitnick is saying that there are jobs in energy here and now and that they deserve a political shove, especially at the state level.

Here are some examples:

•In Minnesota, five transmission lines have been proposed, creating 7,800 jobs.

•In New Jersey, Spectra Energy has proposed to build a gas pipeline, creating 700 new jobs.

•In Texas, Panda Energy is building a power plant using natural gas, creating 500 jobs.

•In Colorado, Xcel Energy is retiring some coal-fired plants, installing pollution-control equipment in others and building new natural gas plants, creating 1,254 jobs.

The biggest job growth by far is associated with shale gas in the states of New York, Pennsylvania and West Virginia: a whopping 165,000 jobs.

When I asked Mitnick why these projects and others have been allowed to back up, he calculated that naysayers, the NIMBY folk, had swarmed state regulators for years, forcing the companies into defensive inaction.

But the midterm elections may have changed all that.

“Governors and state legislators were elected to put job-creation and economic development as priority No. 1,” Mitnick said. Therefore, in the new climate, opponents of growth can be reasoned with or sidestepped when jobs are at stake.

“The governors simply need to get the word out to state regulators that the world has changed and regulators need to make job-creation and economic growth part of the equation,” Mitnick said.

So it is back to the future, according to Mitnick, who taught economics at Georgetown University early in his career.

“Throughout the 20th century, utilities and energy companies were engines of growth because they could efficiently finance infrastructure growth,” he said.

Will an explosion of energy infrastructure jobs push up utility bills? Not much, Mitnick said, because most of an energy bill is for fuel and taxes. Besides, there would be an efficiency premium for the consumer, he added.

The idea here is not that it is green vs. brown, but now vs. later.

Filed Under: King's Commentaries Tagged With: DADA, energy companies, energy infrastructure, jobs, NIMBY, state energy regulators, Steven Mitnick, utilities

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