Energy & Power Generation – Page 61

Drought

November 9, 2007November 8, 2007 by Carl from Chicago

I spent over a decade working in the energy industry, focusing on electric and gas utilities. These utilities have some key similarities and some differences – they both have transmission (pipelines and overhead transmission lines) and distribution (local lines into your home), as well as customer service (local trucks, service, and billing). Gas companies don’t have “generation” in terms of power plants, but they do have drilling and gathering (within the US) or entry through a liquefied natural gas (LNG) port from a third countries, then into a pipeline.

Gas can be stored under pressure; in the summer gas companies historically injected gas under pressure into the ground, which they then pulled out of storage in the winter when gas demand “peaks”. In the summer, gas prices are at their lowest (maybe $2-$4 / unit) and then they are at their highest in the winter ($8 – $10 / unit). In the olden days (when I worked in the early 90’s) gas wasn’t “marked to market” every day; the gas company was either short or long gas on a given day, and then they trued-up with their suppliers periodically. In my audit I pointed out that the local utility had been “shorted” gas by their suppliers in the winter (when prices were high) and their suppliers made it up in the summer (when prices were low) – by this I pointed out that the local utility was losing hundreds of thousands / year by trading the same commodity in this unfavorable manner (even though the # of units were the same).

Electricity isn’t as widely traded as a commodity because it can’t be stored (at least not effectively). Thus its price can range from negative (it can be more expensive to restart a giant plant than to run it and sell the electricity at a loss) to almost an infinite price if it is a hot day and the transmission lines are overloaded so that only local generation can satisfy the demand. The price would need to be determined by location (city) and then by time; thus electricity can be cheap in one location or overnight and then by sky-high at a neighboring city during 1pm during the heat of the day.

Another element that electricity and gas have in common are “classes of service” – they include residents, government (street lighting), small businesses, and large businesses. Each of these utilities have chronic and continuing arguments to determine how to spread the burden ACROSS these classes of customers; government usually pays the least, but then it goes backwards from large businesses to small businesses and then residents, on a per/unit basis. There are convincing arguments for each class; the big business customers put almost no demand on distribution and customer service but put a huge burden on generation (unless they have their own generation); while individual customers go the other way. The “joke” in the industry was that you could raise rates as long as you didn’t raise them for their rate class (I never said utility people were particular funny).

The point of this isn’t really gas or electricity; it is water. Water is relatively similar to a gas utility with a transmission and distribution network. Water doesn’t have generation but is gathered through wells or collection (dams).

Power… and the naive

November 9, 2007October 29, 2007 by Carl from Chicago

Two frequent topics intersect in this Wall Street Journal article from today, October 29th titled “Power Firms Grapple with Tough Decisions”. The topics are 1) journalists that don’t understand what they are writing about 2) the impossibility of improving our US infrastructure in today’s legal and regulatory climate.

The journalist writes that “A year ago, it looked as if 100 coal-fired plants might get built.”

Only an incredibly naive person who didn’t understand anything about the history of the US energy industry would have assumed for an instant that ONE HUNDRED coal-fired plants could possibly be built in the US. Let’s sum up the power situation for you:

1) NUCLEAR – great, unless you worry about storing the radioactive waste
2) HYDRO – great, unless you love fish and babbling brooks
3) COAL – great, unless you worry about global warming
4) NATURAL GAS – great, unless you are paying the bill
5) SOLAR – great, unless you need power on peak and the sun isn’t shining
6) WIND – great, unless you don’t like the way they look, slice birds, and the fact that they are unreliable on peak

Nuclear Power and The Chicago Tribune

November 9, 2007August 26, 2007 by Carl from Chicago

On the editorial page of the Chicago Tribune they recently wrote an article titled “Restored Faith In Nuclear Power”. This article summarizes the recent earthquake in Japan and the fact that it occurred right under a nuclear plant. Even though the plant wasn’t rated to support an earthquake, it withstood a 6.8 magnitude earthquake with only minor damage and no radiation leakage.

Next, the article talks about the fact that there is some nuclear construction occurring in the US. They cite the Tennessee Valley Authority (TVA) and the fact that they restarted the Browns Ferry Nuclear Plant in mid-May 2007 after a $1.8 billion effort, which took 5 years. Other nuclear plants on the drawing board are supposedly reducing the licensing frame to four years and construction to three years, meaning that nuclear plants could come online in seven years.

The article also mentions that the UN report on global warming mentioned that nuclear power had to be part of the mix alongside wind and renewable resources to reduce global warming. Thus, they conclude, the US can have faith in nuclear power, and left the feeling that in fact more nuclear power is on the way.

While I personally believe that nuclear power IS an essential part of our energy portfolio and that encouraging nuclear power is good for the country and our balance of trade, I think that this editorial is way too optimistic and there in fact is little hope of a nuclear power revival in the US.