Energy Exchange

Standing Or Elbow Room In The Energy Sector?

By Jamie Fine / Published: October 16, 2012

GridWeek 2012 convened earlier this month in Washington D.C., and as a first time attendee, I left breathless and hopeful – yet confused – by inexplicable lingering complacency.  Unbeknownst to me, by agreeing to be a panelist in two sessions, I was setting up a comparative experiment. For the first panel, I spoke on “New Utility Business Models” to a packed room of the glimmer-eyed new energy intelligentsia, which is what makes GridWeek so exciting. In the later days of the conference, about a dozen GridWeek participants interspersed amongst a room of mostly empty seats to hear my panel presentation on “Smart Grid’s Role in New Air Quality Standards.”      

It would seem that I, and the handful of attendees at the air quality panel, see the productive overlaps between air quality standards compliance, smart grid and new utility revenues.   There are several ways that smart grid provides a value proposition for utilities faced with increasingly stringent air quality regulations, most recently the Mercury and Air Toxics Standards (MATS) rule. Here’s a short, but by no means comprehensive, list of both synergies and potential tensions:

  • Renewable Portfolio Standards (RPS): Smart grid supports achieving higher and higher proportions of intermittent, non-dispatchable renewable electricity generation.   Achieving high levels of RPS will be expensive unless we can use new strategies to manage intermittency and power quality.  New pricing structures for utility services can provide incentives to invest on both sides of the meter, and open the door for historically hidden utility services (such as voltage regulation) to be priced and sold.  For incumbent utilities, there is an opportunity to identify and price network services that traditionally have been bundled into rates.
  • Electric Vehicles (EV):  EVs are an important new frontier for utilities, and like most frontiers, offer both promise and peril.  Overloaded distribution networks might keep the utility engineers up at night, while the emerging new customer class has utility shareholders thinking like venture capitalists.  Though still small in number, EVs are quickly driving utility planners and system operators toward a fork in the road. Do we provide safe reliable service to new and existing customers using expensive dirty methods of the past (i.e., more big power plants) or do we take a deep breath (of cleaner air) and trust in the power of the people by embracing distributed energy resources?  
  • Distributed Energy Resources (DER):  Rooftop solar, energy efficiency, and demand response, collectively known as distributed energy resources, unquestionably can provide the low cost, clean pathway towards both energy independence and a sustainable economy.  However, DER is harder to plan and dispatch, and it threatens the traditional utility business models of incumbent institutions.   In California, net energy metering policy has been an important ignition switch, fueled by the California Solar Roofs Initiative, but these successful policies need to evolve to achieve DER at larger scales.   Again, the key is precisely pricing the goods and services on both sides of the meter.  Utilities should be paid for power quality and storage services provided to owners of rooftop systems, while electricity from those rooftops should be priced fairly to provide incentive to invest.
  • Clean air standards:  Oxides of nitrogen, particulate matter, acidifying compounds and carcinogens, such as mercury, are the power sector’s long-time emissions concerns.  Across the nation, electricity generators must hold permits to pollute and tradable emissions allowances that must be acquired at nontrivial prices.   Starting in 2013, California electricity generation that emits global warming pollution will have an associated cost –carbon allowances in the state’s cap-and-trade program.  Already, polluters in Southern California must acquire emissions allowances for the RECLAIM program, and power plants nationwide must comply with the acid rain emissions allowance program established in the Federal Clean Air Act .  Similarly, the Regional Greenhouse Gas Initiative (RGGI) program puts a price on carbon emissions for nine northeastern states, and the Western Climate Initiative is endeavoring to do the same for West Coast states and Canadian provinces.  These programs use emissions allowances that are fungible and tradable, yet they represent real costs – and thus economic opportunity when avoided.  Pollution pricing is changing business models throughout North America.    But there is more to come.  For example, improved environmental performance enabled by smart grid technologies, such as increasing DER, presents new avenues to meet air quality requirements.  For the Environmental Protection Agency (EPA) and other oversight agencies, the ability to measure, verify and enforce DER is key to granting compliance credit, and such capabilities are increasingly cost-effective with smart grid deployment. 
  • Consumer empowerment:  The mobile phone revolution is a prelude to what may be possible once consumers and producers begin to see true pricing in the energy marketplace.  While load-serving entities can find new revenues through services, consumers and entrepreneurs will be motivated by new ways to make a buck, or avoid spending bucks through unnecessary energy waste. 

The new smart grid business frontier has, in fact, many frontiers.  The California Public Utilities Commission conceived of an electricity ecosystem comprised of smart consumers, smart markets and smart utilities.  Utilities are trying to find their new niche within the ever changing food web, and all ears are perked for new opportunities.  That’s why only standing room was available in the business model panel session at Gridweek.

Meanwhile, in the air quality session of GridWeek, there was plenty of elbow room.EPA is considering flexible strategies for meeting new emissions standards for carcinogens.  Many utilities are operating in permit constrained areas that fail to meet National Ambient Air Quality Standards.  Enlightened utilities are seeing demand-side strategies as increasingly viable with smart meter deployment, and a means to improve returns to shareholders.  Performance-based rate of return can be structured to both reduce sales of energy to customer and to improve utility earnings. 

Gridweek revealed to me that many are educating themselves about new business opportunities, but precious few have the connected the dots to air quality improvements.   If I could, I’d bet on the folks who attended both sessions.

Also posted in Energy Efficiency, Grid Modernization, Renewable Energy / Read 1 Response

Pecan Street To Be Recognized At GridWeek 2012

By Marita Mirzatuny / Published: September 25, 2012

Next week, thousands will descend on Washington DC for GridWeek, the “only international conference focused on smart grid.” Now in its 6th year, GridWeek “attracts the complete diversity of global electric-industry stakeholders to explore Smart Grid’s impact on the economy, utility infrastructure, consumers and the environment.”

The theme for this year is centered on deriving value for all stakeholders from an increased complexity, as “grid-modernization and smart grid efforts provide the energy industry with more information, a broader system view, and more efficiency and control.” Three key elements will be explored: stakeholder value, managing complexity and smart energy policy. EDF Economist Jamie Fine will be speaking on the “New Revenue Streams for Utilities” and “Smart Grid’s Role in New Air Quality Requirements” panel discussions at GridWeek.

At the center of all of these themes is Austin’s own Pecan Street Inc. (Pecan Street). Which is why it is no surprise that it is being recognized by the GridWeek Advisory Board for “significant achievements in “Extracting Smart Grid Value” — for all stakeholders, including utilities, consumers and society at large.” Also recognized are the Smart Grid Interoperability Panel (SGIP) and Green Button, a “voluntary effort and the result of a White House call to action: ‘provide electricity customers with easy access to their energy usage data in a consumer-friendly and computer-friendly format via a “Green Button” on electric utilities’ website.’”  Read More »

Also posted in Grid Modernization / Comments are closed

Recycling That White Plume Of Smoke On I-95

By Jackie Roberts / Published: August 30, 2012

Today, President Obama signed an Executive Order to facilitate investments in capturing waste heat and developing combined heat and power at many of our industrial facilities (“CHP” projects).  This energy efficiency strategy can save manufacturers as much as $100 billion in energy costs over the next decade, and offers a type of “renewable” energy as the heat is already available, but too often vented to the atmosphere.  According to Oak Ridge National Labs, many industrial operations have an efficiency of 45% or less; waste heat recycling can increase the efficiency of these systems to 80% by capturing waste heat and putting it back to work.

You may have never thought about waste heat, but you’ve probably seen it many times:  visualize driving through an industrial area and seeing white smoke coming out of smokestacks.  These plumes often comprise heat and steam, and thus represent a wasted resource that we should be capturing and converting to useable energy. 

The Executive Order should spur prompt actions by federal and state agencies to facilitate projects.  Examples of possible actions are streamlining state permitting, crediting projects toward state clean air requirements, sharing state best practices, and working to better engage utilities in partnering on projects. 

CHP projects will not only help our industrial facilities save money on energy costs, but investing in these projects create jobs across a wide variety of businesses engaged in making components, designing and constructing systems, and operating the new energy resources.  For example, a recent study by Duke University on recycling industrial waste energy highlighted the six main components needed in each project:  boiler/steam generators, steam turbines, generators, condenser/cooling tower, steel piping and electrical parts such as wires and switchgear. 

These components represent standard, high value components made by businesses across the U.S., particularly the Midwest and Texas, but also companies in Oklahoma, Georgia, Illinois, and Arizona.  All of these components use smaller parts such as basic bearings, valves, fans, rotors, and so on, not to mention the extensive steel piping used in each project.  One project in Port Arthur, Texas used 2.5 miles of steam pipeline – good news for the steelworkers. 

In addition to the job of manufacturing all these parts, CHP projects require workers to install the components on-site, such as welders, pipefitters, design engineers, and traditional construction workers.  On completion, often 15-20 new workers are hired to run the new steam plant/power facility.  The CHP project developer, Recycled Energy Development, notes that the cost savings and increased competitiveness at a project completed for West Virginia Alloys enabled the plant to retain its entire workforce, rather than face job cuts of 20%. 

So, every time you pass a white plume of smoke on the highway, be glad that today’s Executive Order moves us one step closer to eliminating this waste and helping America’s industries be more competitive.

Also posted in Energy Efficiency / Read 3 Responses

America’s Military Renewables Plan Fast-Tracked And Mission Critical

By EDF Blogs / Published: August 23, 2012

By: Jillian Jordan, EDF Energy Marketing & Communications Intern

This months’ announcement from the White House calling for green energy bids and its plan to fast-track wind and solar projects delivered a clear message that renewable energy is something the American military – and its government – whole-heartily believes in. The federal government’s Renewable Energy Partnership Plan (Plan), headed by the Department of Defense (DoD) and the Department of the Interior (DOI), is pushing new project development on and near numerous military installations to the tune of $7 billion dollars.

Even more compelling is the fact that clean energy is now considered part of America’s national security plan by key political figures and the DoD. The White House’s Heather Zichal, Deputy Assistant for Energy and Climate Change, has commended this strategic move towards clean energy and endorsed the Plan as “operationally necessary, financially prudent and mission critical.”

So mission critical, in fact, that the Army has planned the incorporation of renewables as a high-priority tactic for saving lives. Military convoys have long been known to be one of the most dangerous operations, costing more lives than many other career fields in the armed forces. When supplies like gasoline run out, transportation troops are assigned the duty of delivering them through hostile territory. For every 24 fuel resupply missions, one American life is lost – which constitutes one out of every eight deaths in Iraq. Using clean energy actually saves lives for today’s military. The less fossil fuel used and the less dependent we are on oil, the less convoy trips are needed for refueling and to run diesel generators that power military tents, therefore minimizing the risk for American troops. 

The alternative energy infrastructure projects under the Plan will create jobs favoring local economies, produce about 7,200 megawatts of energy and utilize millions of acres of public lands and offshore areas that are best suited for wind and solar projects, all while meeting the goals of the federal Energy Policy Act of 2005. Under the Act, the military has voluntary plans for 25% of its energy produced by clean sources by 2025.

“Developing renewable energy is the right thing to do for national security, as well as for the environment and our economy,” Secretary of Defense Leon E. Panetta said. “Renewable energy projects built on these lands will provide reliable, local sources of power for military installations; allow for a continued energy supply if the commercial power grid gets disrupted; and will help lower utility costs.”

In addition to becoming independent from the national grid, utility costs have been upwards of $4 billion annually and the task force assigned to the Plan is determined to lower the DoD’s energy bill and curtail energy usage. But, above all, the goal is to maintain the military’s ability to remain powered during mission-critical times. Conditions of the Plan offer an added safety net in the event of a massive blackout or, for a worst-case-scenario attack on America’s power grid.

Preliminary site evaluation began with DOI’s Smart from the Start initiative under Secretary of the Interior Ken Salazar.  Pilot projects are currently underway in Arizona, California, Nevada and Wyoming, with more fast-tracked proposals to be announced in the next few weeks. The Renewable Energy Partnership Plan signed between the two agencies would allow the military to purchase power produced from homegrown, renewable energy sources, which could lead to a reduction in clean energy costs and an overall boost to the alternative energy sector.

Of the DOI’s 28 million acres, 16 million of which were designated for defense, 13 million that are rich in resources and ideal for wind, solar and geothermal power generation. “Our nation’s military lands hold great renewable energy potential, and this partnership will help ensure that we’re tapping into these resources with a smart and focused approach to power our military, reduce energy costs, and grow our nation’s energy independence,” Salazar said.

Also posted in Renewable Energy / Read 5 Responses

Natural Gas – A Briefing Paper For Candidates

By Eric Pooley / Published: August 10, 2012

To download a copy of this briefing paper, please click here.

Hydraulic fracturing and horizontal drilling, processes used to extract natural gas from underground shale formations, have unlocked vast new domestic reserves — an unexpected abundance that has overturned many of America’s assumptions about energy. Every major-party candidate for public office in 2012, Republican or Democrat, must understand this new energy reality. And though each candidate’s position on natural gas development is likely to begin with a recognition of shale gas’s economic and energy security benefits, mastery of the issue requires a deeper level of understanding.  Shale gas also brings with it a set of serious risks to public health and the environment — including impacts to water, air, land, local communities and the earth’s climate. At the local level in areas where shale gas production is intense, legitimate concerns over health and environmental impacts are shared by Republican, Democratic, and independent voters alike. No candidate’s position on natural gas can be considered complete unless it addresses these impacts.

In 2001, shale gas accounted for just 2% of America’s natural gas supply.  Today, it accounts for more than 30% — while more than 90% of all new oil and gas wells being drilled in the U.S. make use of hydraulic fracturing. As unconventional natural gas production spreads into populous regions that are not accustomed to intensive industrial activity, its impacts have made it the object of intense local opposition, as manifested in the July 28th “Stop the Frack Attack” rally in Washington D.C and others like it in state capitals around the country. The environmental and public health concerns of local communities must be addressed if natural gas companies are to maintain their social license to operate.

Economic Benefits

While a majority of Americans remain unfamiliar with hydraulic fracturing, or “fracking,” according to a recent University of Texas poll, many will certainly applaud the economic benefits of low-cost natural gas. The natural gas revolution is driving: 

  • Job creation across the value chain, with rising demand for technical and professional services, for steel, pipelines and storage facilities, and for all the ancillary goods and services that arise in support of a rapidly growing industry. 
  • An unexpected expansion in the American chemical industry, with Dow and DuPont now building new plants close to shale formations. “If you had told me 10 years ago I’d be standing up on this podium making this announcement [about Dow’s $4 billion investment in four new Texas chemical plants], I would not have believed you,” Dow CEO Andrew Liveris said in April. “The cost of energy, the cost of feedstocks … was pricing the United States out of the market,” he said. But the shale “miracle” changed that. 
  • A revival in U.S steelmaking and other manufacturing industries. Nucor, which uses natural gas to make steel, is building a $750-million facility in Louisiana, just eight years after shutting down a similar plant in the same state. 
  • A new sense of the potential for U.S. energy independence and energy security.

Environmental Benefits

Increased development of shale gas could yield substantial environmental and public health benefits while helping the U.S. energy infrastructure become cleaner and less carbon-intensive. This highly desirable outcome will only be achieved, however, if the resource is developed responsibly. The potential exists because natural gas: 

  • Produces only about half the carbon dioxide of coal when burned.
  • Produces about a third as much of the smog-forming nitrogen oxides that come from burning coal.
  • Produces almost none of the mercury and sulfur dioxides that come from burning coal or oil.  

For this reason, fueling power plants with natural gas instead of coal can dramatically cut conventional air pollution, can help reduce greenhouse gas emissions from the power sector and could help turn the tide against mountaintop removal mining and other environmentally disastrous industry practices. And because natural gas-fired power plants can cycle up quickly, they can be a nimble enabler of intermittent renewable energy sources in combination with demand response and emerging large-scale energy storage technologies.

Critically, if U.S. industry and regulators are successful in measuring and reducing methane pollution, which undermines natural gas’ role as a lower carbon alternative to coal and oil, the shale gas revolution can also bring a reduction in short-term radiative forcing — the driver of global climate change — over the next several decades. Leak reduction will determine how much of a role natural gas can play in a clean, low carbon future.

In short, natural gas could be a win-win  benefiting both the economy and the environment — if we do it the right way. The right way means putting tough rules and mandatory environmental safeguards in place that protect communities and reduce methane pollution. There is no question that domestic unconventional gas supplies are leading to coal-fired power plants being retired.  The public recognizes this benefit, but the jury is still out on whether shale resources can be produced responsibly. It’s no simple task to strike a balance between public safety and the development of this crucial energy resource, but it is essential that we do so.  Americans deserve assurance that the economic, environmental and energy security benefits of shale gas development will be realized without sacrificing their health, safety, or the protection of the environment.

Clearly there are environmentally sensitive areas that should be off limits to natural gas development. And just as clearly there are some areas where intensive development will occur. Environmental Defense Fund is working with partners from academia, civil society, and industry to identify and minimize the impacts from the full range of gas development activities. Horizontal drilling and hydraulic fracturing attract significant press attention, but the issues of gas production are much broader than that.

Specific Areas of Concern

EDF sees five areas in which strong rulemaking is necessary: 

  • Mandating greater transparency in industry operations. Having good data is a prerequisite to understanding and mitigating risks, and it’s the first step toward winning back a badly damaged public trust.  Regulators should require, and companies should embrace, disclosure policies that mandate reporting of not only the chemicals used in hydraulic fracturing, but also chemicals used in drilling and operating wells – as Ohio Governor John Kasich has advocated.  Transparency should also be brought to other aspects of industry operations, such as detailed reporting of air emissions, chemical characterization of waste streams and tracking and reporting of water use and waste disposition.  Company compliance histories should also be catalogued and reported, so companies with good records can get the credit they deserve and bad actors can be identified and pushed to improve performance. 
  • Modernizing rules for well construction and operation. Poor well construction and operation can lead to groundwater contamination and to blowouts that can endanger lives and foul the surface environment. In response, EDF is working with regulators and key stakeholders to strengthen rules for proper construction and operation of hydraulically fractured wells. While stronger regulatory oversight of well construction is needed, no one should try to suggest that hydraulic fracturing itself is risk free.  Both aspects of well development need strong oversight.
  • Strengthening regulations for waste and water management.  Poor handling, storage and disposal of production fluids and other wastes is a major issue; chemical spillage is the leading cause of groundwater contamination from gas development activities. In response, EDF is pressing for measures to reduce spills, improve the use and handling of chemicals, and assure proper disposal (or recycling) of produced water.  As mentioned above, a key missing ingredient here is better data on the chemical composition of waste streams.  To be confident that handling, treatment and disposal practices are sufficient, authorities must know what substances are being handled. Finally, headline-grabbing reports of earthquakes connected to shale gas development have been linked to the waste disposal method known as deep well injection, not to hydraulic fracturing itself. This issue points to the need for improved seismic analysis prior to permitting of deep injection wells.  
  • Improving regulations to protect local and regional air quality. Air emissions resulting from the production, storage, processing, and transportation of natural gas can threaten public health. Leaks and routine venting during the extraction, processing and transportation of natural gas result in emissions of greenhouse gases and, depending on the local composition of unprocessed gas, other pollutants that contribute to locally- and regionally-elevated air pollution.  In 2009, an SMU study estimated that the combined amounts of volatile organic compounds (VOC) and nitrogen oxide (NOx) emissions from oil and natural gas production in the Barnett Shale of North Texas were comparable to amounts of those emissions from the roughly 4 million cars and trucks in the adjoining Dallas Fort-Worth metro area. Fortunately, widely available and cost-effective remedies exist: repairing worn equipment, using “green” well completion techniques and eliminating venting are just a few. In the past five years, for example, Southwestern Energy says it has cut the cost of capturing stray emissions from $20,000 a well to close to zero. The company is capturing an average of 16 million cubic feet of gas that would otherwise have been released or flared. Southwestern also uses special pop-off valves to make sure natural gas is not released into the air from well casings. If pressure causes a valve to open, the gas is captured in a closed loop that returns it to the system, saving the resource. These systems cost just $600 to $1200 a piece. 
  • Developing innovative strategies to reduce community impacts. The cumulative impact of infrastructure development, traffic, noise, lights, and the like can overwhelm communities and intrude on sensitive ecosystems and habitats; none of this is easily addressed through conventional regulatory approaches. Instead, EDF recommends that states and local governments bring together stakeholders for scientifically based, bottom-up planning processes designed to address unique local needs. Likewise, the right of local communities to regulate the location of gas development through local zoning ordinances must be preserved.  Gas operations shouldn’t receive special carve-outs from traditional local powers that other industrial activities must comply with. 

President Obama has voiced his commitment to domestic energy production through safe and responsible natural gas development, declaring that “America will develop this resource without putting the health and safety of our citizens at risk.” EDF would like to see Governor Romney and other candidates across the land call for the same careful balance. Far from being an example of regulation that chokes economic growth, strong oversight of natural gas development is necessary to ensure the sector’s continued growth, by avoiding the public backlash that could slow or even derail natural gas development.  Read More »

Also posted in Methane, Natural Gas / Tagged , , | Read 11 Responses

Strong Standards Are Needed To Protect Human Health From Harmful Air Pollution Emitted From Oil And Gas Activities

By Ramon Alvarez, Ph.D. / Published: March 30, 2012

Update: Please note that the EPA is now due to finalize the national emission standards for oil and gas activities by Tuesday, April 17.

On April 3, 2012 the Environmental Protection Agency (EPA) is due to finalize national emission standards to limit some of the harmful air pollutants discharged from a variety of oil and gas activities.   As Environmental Defense Fund (EDF) has noted in past blogs, leaks, venting and flaring of natural gas from oil and gas activities contribute to ground-level ozone (“smog”) and toxic air pollution.  As proposed, EPA’s standards would reduce volatile organic compounds that contribute to smog by 25% and hazardous air pollutants by 30%, through the implementation of proven and highly cost-effective practices and technologies. 

Emissions from Oil and Gas Activities Linked to Unhealthy Levels of Ozone “Smog” Pollution

Extensive oil and gas development in parts of rural Wyoming and Utah, where little other industrial activity occurs, has led to dangerous ozone levels, higher than those recorded in some of the most heavily polluted cities. Last year, families in Wyoming’s Upper Green River Basin suffered over forty days in which ozone concentrations exceeded the current health standard.  In Utah’s Uintah basin, residents experienced twice this number of unhealthy ozone days, with one monitor located in Ouray recording forty exceedances alone.

In 2009 then Governor of Wyoming Dave Freudenthal requested EPA designate counties within the Upper Green River Basin as out of attainment with the current ozone health standard explaining the link between natural gas emissions and the serious ozone problems: 

“The State of Wyoming is also challenged by the need to reduce emissions from the natural gas industry which has not traditionally been regulated for ozone nonattainment problems….Therefore, the Wyoming Department of Environmental Quality (WDEQ) has already identified the sources that require controls such as drill rigs, pneumatic pumps, dehydration units and small heaters.”

EPA  in turn concluded “[t]he [Wyoming] AQD’s analysis provided with its recommendation shows that elevated ozone at the Boulder monitor is primarily due to local emissions from oil and gas development activities: drilling, production, storage, transport and treating of oil and natural gas.”

In Colorado and Texas, smog-forming emissions from the oil and gas industry have exceeded other major sources of pollution such as vehicles.   In 2008, the Colorado Department of Public Health and Environment concluded that the smog-forming emissions from oil and gas operations exceeded vehicle emissions for the entire state.  Similarly, a 2009 study found that summertime emissions of smog-forming pollutants from oil and gas sources in the Barnett Shale were roughly comparable to emissions from all of the motor vehicles in the Dallas Fort-Worth area.

Oil and Gas Activities Emit Benzene-A Known Carcinogen-and other Air Toxics

Venting, flaring and equipment leaks also emit hazardous air pollutants or air toxics, including hydrogen sulfide, formaldehyde and benzene into the environment.  Elevated levels of benzene have been detected near gas production sites in Texas and Colorado. In 2010 the Texas Commission on Environmental Quality (TCEQ) measured acute concentrations of benzene that exceeded the state’s health-based risk levels at two exploration and production sites in the Barnett Shale in Texas. Research based on air samples taken from oil and gas sites in the Piceance Basin in Colorado in 2008 determined that emissions from well completions, dehydration units, and condensate tanks posed an elevated cancer risk to nearby residents. Similarly, atmospheric measurements collected by researchers at the National Oceanic and Atmospheric Administration concluded that “oil and gas operations in the DJB (Denver-Julesburg Basin) could be the largest source of C6H6 (benzene) in Weld County.”

As oil and gas development continues to expand across the country, strong, national clean air standards are essential to protect public health.  EPA’s standards, which build on clean air measures already in place in states with extensive oil and gas activities, such as Colorado and Wyoming, are an important first step in strengthening clean air protections for human health and the environment.

Also posted in Climate, Natural Gas / Read 1 Response