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Administration Offers Fluff on Grid Policy

By Kennedy Maize

 
Washington, D.C., June 16, 2011 — The Obama administration’s latest genuflection toward the smart grid, announced with considerable fanfare and a dog-and-pony show put on the by White House’s science office this week, was an empty spectacle. It featured a cast of stars: science advisor John Holdren, energy secretary Steve Chu, ag secretary Tom Vilsack, Nancy Sutley, chair of the White House council on environmental quality.

 
As for substance, there was considerably less than meets the eye. It was, in fact, rhetorical smoke and mirrors, old policy wine in new bottles, yawn-inducing stuff. The announcement of “the president’s plan for a 21st century electric grid” was a rehash with a dash of not-very-interesting almost-news: plans by the ag department’s Rural Utilities Service to put another $250 million in loan guarantees into a number of worthy projects, most of which have justifications that have little to do with smarts on the grid. For example:

 
* Blue Grass Energy Cooperative Corp. in Kentucky will get almost $38 million in a loan guarantee to build some 152 miles of distribution lines. The co-op will use $2.7 million of that for smart meters (which, if they count as “smart grid,” they are on the low-IQ side of the definition).
* Jasper County Rural Electric Membership Corp. in Indiana will get a $4 million guarantee to build 17 miles of new distribution line and make improvements on 19 miles of existing distribution lines. They will use $15,000 for advanced meters.
* Benton Rural Electric Association in Washington state will get $10 million in loan guarantees for 32 miles of new distribution lines.

 

And so it goes, money from RUS (not taxpayer money, by the way, but loan guarantees) for projects that make sense without hanging the sweet-smelling smart grid greenery around their necks.
There’s a reason why the White House highlights rural electric cooperatives, and not projects involving large, investor-owned electric companies. That’s because the cooperatives are generally exempt from federal and state regulation. Their distribution lines are largely under their control, as are the rates they can charge to recoup their costs. So there’s almost no chance that the loan guarantees will ever result in a claim against the government.

 
That’s not the case for the IOUs. Distribution lines, and most of the allegedly smart grid stuff involves distribution and not transmission (the official regulatory distinction is 100 KV), requires state regulatory approval. For transmission lines that are involved in interstate commerce — and I would argue that its this transmission grid that’s in real trouble in the U.S. — FERC has sway. Sort of. As most readers probably know, FERC is unable to assert national interests over state concerns in siting large, long lines, the 2005 Energy Policy Act to the contrary notwithstanding.

 

In the most telling and genuine moment in the event, Chu cited what he sees as the need for “an honest conversation” about the vexing federalism issues. Does it make more sense to build wind farms in North Dakota and ship the power long distance to Chicago, or build the generation close to the load?
And then Chu committed the major truth, which gets in the way of any fruitful attempt to deal with the problems facing the electrical grid in the U.S. “We have no authority,” the low-key Chu lamented, almost in passing.

 

Indeed, the problems of the U.S. transmission grid — which won’t be resolved by the peripheral and ephemeral smart grid — can’t be solved under the current system of divided powers between the states and the national government. The U.S. has no grid today. It has at least three — the Eastern Interconnection, the Western Interconnection, and Ercot. As I see it, the big task is to integrate and interconnect the transmission grid, creating a national grid. That’s impossible today, and administration-staged opera bouffe — complete with tarted-up studies describing phony policy “pillars” that have less substance than the mythical pillars of Hercules — make no contribution to the honest conversation.

Khosla Clobbers Conventional Wisdom

By Kennedy Maize

Washington, D.C., June 12, 2011 – Venture capitalist Vinod Khosla appears to relish the role of contrarian, something the world of “green” and “smart” energy, whatever those terms mean, lacks in abundance.

So it was that Khosla recently appeared at the annual Energy Storage Association meeting and made a presentation that led Eric Wesoff of Greentech Media to bet that Khosla won’t be invited back. Khosla debunked much of the dogma of those on the smart and green street (not to be confused with Sydney Greenstreet) in his talk.

Before getting into the content, let’s establish Khosla’s credentials. The details are available from his Khosla Ventures website. But here’s the Cliff’s Notes version: Electrical engineering degree from the Indian Institute of Technology, master’s in biomedical engineering from Carnegie-Mellon, Stanford MBA (1980), founded Sun Microsystems, which was financed by legendary venture capitalist John Doerr of Kleiner Perkins. Joined Kleiner Perkins as general partner in 1986. Started his own venture capital firm in 2004.

In short, Khosla is no dummy and is technically savvy and sophisticated. So what this billionaire says about high-tech ventures, such as smart grids and energy storage, carries considerable weight.

And here are some of the things he said to the grid storage gurus.

• The smart grid is “smart hype.” In other events, Khosla has asked his audiences: “If your air conditioner used 80 percent less energy, would you care if it was ‘smart’ or not?” Hooray! As dedicated readers of this blog (there might be at least one of you) know, I’ve been grousing about smart grids for years. I’ve argued that a strong grid is more important than a smart grid, particularly when the smart grid makes the U.S. electrical system more vulnerable to solar storms and cyber criminals.
• Storage is an important and under-appreciated aspect of electricity’s future. If the ability to easily and cheaply store electricity develops, the entire game changes. Demand response becomes far less significant (customers want electricity and will do without only as a second-best alternative). Khosla has said repeatedly, “If you have highly efficient systems, energy storage or distributed generation, you don’t need demand response.” Storage also solves the inherent problems of wind and sun by providing a way to dispatch them.
• Lithium ion batteries won’t make it for grid-scale storage. The technology “can’t be deployed at scale” and requires too much human attention. Among other problems, lithium ion batteries can catch fire and blow up far too easily. He predicted that the lithium ion battery venture A123 Systems, which has been getting a lot of publicity recently, won’t be around in 10 years. This, Greentech Media reported, left some of the energy storage executives at the meeting “aghast.”

But the market has justified Khosla’s views of A123. Last Thursday, two days after his talk to the energy storage meeting, the company’s stock hit a 52-week low, trading at $5.11/share, down from a high of $11.53. The shares have fallen over 44% this year. The Street website has tagged a “sell” recommendation on A123, commenting, “The company’s weaknesses can be seen in multiple areas, such as its feeble growth in its earnings per share, deteriorating net income, disappointing return on equity, weak operating cash flow and generally disappointing historical performance in the stock itself.”

Last month, Khosla filed papers with the Securities and Exchange Commission announcing he is raising over $1 billion for a new fund, Khosla Ventures IV, similar in amount to a fund he raised in September 2009.

Here are some words of wisdom from the Khosla Ventures website:

“Change depends on unreasonable people. Don’t assume–analyze. Brutal honesty trumps hypocritical politeness. Have courage. Build companies instead of cutting deals. Thrive on technological risk. Ignore the nonsense of conventional wisdom.”

 

Lights Out at FERC

By Kennedy Maize

Washington, D.C., June 1, 2011 – Maybe no electric utility in the country has a worse reputation for reliability that Pepco, which serves the nation’s capital and much of its Maryland suburbs. The company is under fire from District of Columbia and Maryland utility regulators for a record of storm-related blackouts over the past couple of years, all hitting hundreds of thousands of customers who work for the three branches of the federal government.

So what could be worse that blacking out D.C. and Montgomery County, Md.? How about blacking out the Federal Energy Regulatory Commission?

Yep, that’s what happened today (Wednesday, June 1). During a protracted Memorial Day heat wave, with temperatures in the mid-90s, some 5,000 Pepco customers in the Northeast section of the city lost power Tuesday afternoon, and it had not been restored by Wednesday evening. Prominent among them: FERC.

The failure of underground cables may have been heat-related, according to a Pepco spokesman, but the utility was uncertain about the exact cause. In any case, the outage forced a local school, some D.C. government offices, the D.C. CNN bureau, and FERC to close for the day.

A notice posted on the FERC website stated: “FERC Headquarters, both 888 and 1100 First Street NE, are closed today, Wednesday, June 1, 2011. Emergency personnel who already have been contacted should report for duty as directed. Non-emergency personnel are on administrative leave today, Wednesday, June 1. Employees should monitor ferc.gov for updates.”

In an email to reporters, FERC spokeswoman Mary O’Driscoll said, “As you likely know now, FERC’s headquarters offices are closed today due to a power 0utage that hit the North Capitol Street area yesterday afternoon.

It is unclear at this time when we will return to the office, but in the meantime, we are posting updates on the ferc.gov website, and to our Facebook and Twitter accounts. We continue to update when events warrant.

As we have noted on our webpage, because of the temporary power outage, any filing with a due date of May 31, or June 1, 2011, will be considered timely on the next business day that FERC is open.”

Pepco wins the POWER Blog (not so) cool move of the week award.

 

Update: 6:06 p.m. Thursday, June 2, 2011 — FERC remained closed on Thursday, extending an electrical outage at the nation’s chief regulator of electric reliability (working, of course, with the North American Electric Reliability Corp.) that began Tuesday evening. The responsible utility, Pepco, has been unable to keep the lights on at FERC for any extended period of time.

On Thursday morning, FERC spokeswoman Mary O’Driscoll emailed reporters: “FERC is closed again today due to the Pepco power outage. Power was temporarily restored at 9 p.m. last night both FERC Headquarters buildings at 888 and 1100 First Street, NE. However, it was lost again shortly around 11 p.m.

Pepco has informed us that they are working to remedy the situation and expect to restore power again this afternoon. Emergency personnel who already have been notified should report for duty as directed. Program Office leadership will be in touch today with other staff on potential alternate work arrangements. All other personnel are on administrative leave today.”

Will the regulators be back in business this week? The over-under is noon Friday. Stay tuned.

Final Update, 6:46 p.m. Friday, June 3, 2011 –FERC’s lights were on by Friday as the business day began at 9 a.m., although it took a bit longer for the agency’s website to get fully populated. Those who bet the under are the winners. No word whether FERC is going to have a special technical workshop to examine Pepco’s reliability performance.