Alternatives to baseload generation
Though the need for new baseload capacity is clear to these CEOs, it represents kilowatt-hours available within the next five to 15 years, so they’re also necessarily looking at what they can do now. All addressed the current darlings of ratepayers and regulators: renewable energy and demand-side management.
Morris pointed out that although renewables are economically inefficient, they are environmentally required. He indicated that AEP is working on battery-based storage technology “to make them 24/7.”
It was also refreshing to hear Wood mention that “storage issues are in the forefront.” Integration of wind energy with the grid is the issue, he said (Figure 2). The system is good at handling variable load, but not variable supply. The impetus for solving grid issues is clear, Wood implied, when you consider President Bush’s recent statement that 20% of the nation’s electricity should come from wind.
2. What wind needs to win. Pat Wood III, former FERC chairman and principal, Wood Resources, noted that transmission is the major constraint faced by new wind projects in his home state of Texas. Source: POWER
Lee’s CPS Energy is making a $100 million “initial investment” in conservation and hopes to delay or avoid a baseload power unit by doing so. But, since the utility expects to double its generating capacity over the next 10 years to meet load growth, a huge capital program is still necessary that will likely raise rates 5% per year over the next decade.
Rates will rise
Lest anyone think that they, unlike Lee’s ratepayers, will escape punishing rate increases around the country, regardless of how the next unit is fueled, know that virtually every panelist addressed this issue in different ways. Wood set the stage for this discussion when he reminded the audience that while retail electricity prices have increased by one-third, the national average is 9 cents/kWh. “That’s small compared to gasoline,” he pointed out.
Rogers noted that the real price of electricity came down for 15 years but now is going up, because input costs (for coal and gas) are rising, new baseload units are necessary for the first time in 30 years (in his service territory), carbon legislation is likely in 2010, and the industry needs to convert from analog to a digital, smart grid (Figure 3). He added that the weak dollar is driving up the costs for everything.
3. Electricity still a bargain. Jim Rogers, CEO of Duke Energy noted that the real price of electricity is just now increasing, after 15 years of decline. The weak dollar and rising fuel prices are putting additional upward pressure on the price of electricity. Source: POWER
Morris noted that Americans are not about to become good at energy conservation and that price signals are the only way to check growth in demand.
Fletcher distinguished between “the two hundred commercial and industrial customers that represent half of his load,” and the rest of the ratepayers. He said he needs a “robust digital grid” to serve these customers.
Rogers seconded the importance of a digital system, estimating that “50% of electricity use will be digital in 2020.” We need to optimize networks for our customers but we have to figure out how to get paid, he said.
Fletcher said that “the rate impacts will be the largest in the memory of the voters.” That is an ominous observation for politicians in a state that effectively threw out former Governor Gray Davis over skyrocketing electricity rates in 2001.
Brooks observed that when electricity prices are low, no one cares, but when prices rise, you are “public enemy number one.”
Industry needs a makeover
Electricity prices may even be one factor hurting the generation industry’s rep among its potential labor market. Kids don’t want to work in the power industry, lamented Lee. He called for getting our education system to cultivate the brightest minds to work in our industry; Wood had earlier called for a post-Sputnik type of program to develop new people resources.
Rogers remarked that reinventing the industry as a “high tech” one by emphasizing energy efficiency could help attract new talent. (See the related workforce management article, p. 32.)
Email
Comments
Print
Reuse
