White House Chronicle

News Analysis With a Sense of Humor

The Uber Effect on Electricity

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Leon Trotsky said, “You may not be interested in war, but war is interested in you.” The same thing might be said about disruptive technologies.
The U.S.. electric system, for example, may not be interested in disruptive technology, but disruptive technology is interested in it. What Uber and Lyft have done to the taxi industry worldwide is just beginning to happen to the electricity industry; and it could shock consumers – particularly the less affluent – as surely as though they had stuck their finger in an electrical outlet.
The disruptive revolution is not only happening here, but also in Europe, as Marc Boillot, senior vice president at Electricite de France (EDF), the giant French utility, writes in a new book.
Ironically, here in the United States, disruption of the otherwise peaceful world of electric generation and sale last year was a bumper one for electric stocks because of their tradition of paying dividends at a time when bond yields were low.
The first wave of disruption to electric generation has been a technology as benign as solar power units on rooftops, much favored by governments and by environmentalists as a green source of electricity. For the utilities, these rooftop generators are a threat to the integrity of the electrical grid. To counter this, utilities would like to see the self-generators pay more for the upkeep of the grid and the convenience it affords them.
Think of the grid as a series of spider webs built around utility companies serving particular population centers, and joined to each other so they can share electricity, depending on need and price.
Enter the self-generating homeowner, who by law is entitled to sell excess production back to the grid, or to buy on the grid when it is very cold or the sun isn’t shining, as at night. The system of selling back to the electric company is known as net metering.
Good deal? Yes, for the homeowner who can afford to install a unit or lease one from one of a growing number of companies that provide that service. Lousy deal for the full-time electricity customer who rents or lives in an apartment building.
There’s the rub: Who pays the cost of maintaining the grid while the rooftop entrepreneur uses it at will? Short answer: everyone else.
In reality, the poor get socked. Take Avenue A with big houses at one end and apartments and tenements at the other. The big houses — with their solar panels and owners' morally superior smiles — are being subsidized by the apartments and tenements. They have to pay to keep the grid viable, while the free-standing house – it doesn't have to be a mansion — gets a subsidy.
It's a thorny issue, akin to the person who can't use Uber or Lyft because he doesn't have a credit card or a smartphone, and has to hope that traditional taxi service will survive.
The electric utilities, from the behemoths to the smallest municipal distributor, see the solution in an equity fee for the self-generating customer's right to come on and off the grid, and for an appreciable difference between his selling and buying price. Solar proponents say, not fair: Solve your own problems. We are generating clean electricity and our presence is a national asset.
EDF's Boillot sees the solution in the utilities’ own technological leap forward: the so-called smart grid. This is the computerization of the grid so that it is more finely managed, waste is eliminated, and pricing structures for homes reflect the exact cost at the time of service. His advice was eagerly sought when he was in Washington recently, promoting his book.
While today’s solar may be a problem for the utilities, tomorrow’s may be more so. Homeowners who can afford it may be able to get off the grid altogether by using the battery in an all-electric car to tide them over during the sunless hours.
The industry is not taking this lying down: It's talking to the big solar firms, the regulators and, yes, to Elon Musk, founder of electric-car maker Tesla Motors. He may be the threat and he may be the savior; those all-electric cars will need a lot of charging, and stations for that are cropping up. There’s a ray of sunshine for the utilities, but it's quite a way off. Meanwhile, the rooftop disruption is here and now. — For the Hearst-New York Times Syndicate

Britain’s Power Peril and Its Lesson for the United States

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In Britain, they are talking about "the year the lights will go out." The metaphor is based on the 1951 film "The Day the Earth Stood Still."
 
There are those who believe they can pinpoint the year: 2023. It is the year that all but one of Britain's 16 operating nuclear power reactors will have been withdrawn from service because of their age.
 
Britain commissioned its first nuclear power plant back in 1954. For decades, Britain was at the forefront of the development of nuclear energy.
 
Then came natural gas. Discoveries in the North Sea coupled with improvements in gas turbine technology caused a boom in gas-powered electricity generation. At one point, it looked as though 50 percent more gas-fired electricity generation would be installed than needed.
 
The next surge of generating enthusiasm was for wind. Under the Labor government of Tony Blair, Britain planned to lead the world in wind generation, both on shore and off. Wind, as elsewhere, was subsidized because it was politically lovable. What better source of energy for a windswept island with a stormy coastline than wind, wind and more wind?
 
But the high cost of wind-generated electricity, coupled with intermittent availability, began to turn the country off wind. While the Conservative government of David Cameron is still pushing wind through subsidies, it has been forced into a painful re-think to avoid catastrophe.
 
Coal mines — the engine of the Industrial Revolution — began to be phased out under Margaret Thatcher's Conservative government partly because of continuing labor problems, but primarily because its cost was rising as mines became less productive. Britain became an importer of coal.
 
Nuclear just languished; the fabrication capacity declined, the design shops closed up, and the universities turned out fewer graduates in the nuclear sciences.
 
Then came the gas boom of the 1980s and '90s. The North Sea was full of it, the plants were cheap to build and operate, and the emissions were half those of coal.
 
But gas began to peak in Britain's North Sea fields in 2000, and gas imports began to rise. The jig was up for cheap, non-controversial energy.
 
Cameron's government, looking toward the day when the lights will fail, has supported an aggressive nuclear building program — none of it designed or built by British companies. The French government-owned utility, Electricite de France (EDF), will build the Britain's first new reactors; the technology will come from Areva, the French nuclear plant builder, and some of the construction funding will come from China.
 
But to lure EDF, a mechanism called the “strike price” had to be negotiated. Under this deal, the British government guarantees a floor price for the electricity generated at the new nuclear plants. The strike price for the EDF deal is $154 per megawatt hour, or about twice the current wholesale price of electricity in Britain.
 
British industry is screaming that it will be driven offshore, particularly chemicals. The European Union is screaming that this is a subsidy by another name. And British consumer groups are screaming that it will kill off old people, who will not be able to afford the Gallic electrons.
 
The Cameron government has its fingers in its ears, because it knows the screaming will be far worse if the lights do go out.
 
Across the Atlantic, a sequel to the year the lights will go out in Britain may be in production. We are already shuttering nuclear plants; the total down from 104 to 99 with many more endangered as the plants either become uneconomic, as a result of competition from our gas boom, or too old. Four big new nuclear plants are under construction in Georgia and South Carolina, but they are all that are likely to be built in the foreseeable future.
 
Currently, nuclear plants contribute 19 percent of our electricity, about the same percentage they contributed in Britain in the 1990s before plant retirements began. The numbers are being kept up by extraordinary operating efficiency gains and by upgrading– called “uprating” in the industry — the plants.
 
How long the gas boom will last is a matter of conjecture. The lifespan of the new hydraulically fractured fields is not known, but it is expected to be about one-third that of conventional fields. The full environmental consequence is not known either. Yet the euphoria of gas abundance is boosted by multimillion-dollar campaigns from the oil and gas industries, led by the giant American Petroleum Institute.
 
These advertisements give the impression that gas is forever in America. The way it was in the North Sea? — For the Hearst-New York Times Syndicate

OMB Faulted in Nuclear Abandonment

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If you are heading north on the Chesapeake Bay, just above where the Patuxent River enters it, and you will see the Cove Point liquefied natural gas terminal and gas processing plant.

Journey on, about three miles, and you will see a superbly landscaped industrial installation that, unlike the gas terminal, blends into the cliffs of Maryland. This is the Calvert Cliffs Nuclear Power Plant, which has been making electricity quietly, efficiently and abundantly since 1975.

By contrast, the Cove Point terminal and gas plant has been a symbol of the vagaries of the gas market. Much of the time it has stood idle, with fishermen maneuvering their boats among its piers.

The terminal and gas plant were built when the nation was gripped by the energy crises of the 1970s, the Arab oil embargo and the Iranian Revolution. In reality, it has been seldom used and has been in and out of operation.

Until a week ago the Calvert Cliffs 1 and 2 reactors on the site, 55 miles from Washington, were set to get a sibling. Calvert Cliffs 3, a joint venture between Baltimore-based Constellation Energy and Electricite de France (EDF), the mammoth French utility, was to join the two venerable reactors.

But now there will be no Calvert Cliffs 3, according to one of its promoters, Constellation Energy.

The project has been canceled–strangled in its crib, if you like, by the White House Office of Management and Budget, which insisted on a sky-high fee in return for federal guarantees of the private commercial loans the utilities needed to finance unit 3.

By effective axing a new reactor, OMB was acting against the Department of Energy, Congress, and possibly the wishes of President Obama.

The nuclear industry and Unistar, the Franco-American company created to build Calvert Cliffs 3, say the fee was wrongly calculated and that OMB is contradicting the intention of Congress and the expressed hopes of Obama.

Two other projects are also facing cancellation over the OMB calculation for its loan guarantees. The utilities say the terms dictated by OMB are onerous, just too expensive.

Yet the industry can find no appellate route to overcome OMB’s stubbornness. The result is that the much-anticipated “nuclear renaissance” is sliding back into the dark ages. Only the Atlanta-based Southern Company has come to terms with the government and secured the loan guarantees it sought to build Vogtle, a two-unit plant.

Strangely, Congress and the Obama administration have declared the revival of nuclear power as national policy and money has been appropriated for loan guarantees. But both are seeing their desires frustrated by OMB and its formula for calculating the chances of success or failure for new nuclear projects.

Angered by OMB intransigence, the two partners in Unistar, Constellation and EDF, have fallen out. EDF wants to go ahead, despite the difficulties and possibly with French government money. It may have to find a new American partner because a foreign company cannot own a U.S. nuclear plant outright.

Adding to the agony of the nuclear reactor builders is the changed picture for natural gas. There is now too much of it coming to market for utilities to ignore the attendant low price. At the inception of the new wave of interest in reactors, gas was selling for $7 to $8 for 1,000 cubic feet (a standard measure in gas pricing). Now it is bobbing around $4 for 1,000 cubic feet, which means that utilities are tempted by the low capital cost of gas turbines.

The joker is wild–and the joker is natural gas, aided by the OMB bureaucracy.

The nuclear renaissance may be delayed again in the United States, but 58 nuclear plants are under construction in 14 countries, including 24 in China alone.