by Jennifer Van Burkleo, associate editor
Times are changing for the utility industry. As regulators demand cleaner energy and legislation places additional restrictions on generators, utility executives face difficult decisions. It all means new trends for the industry.
Electric Light & Power magazine asked several experts to weigh in on trends they’ve noticed in their respective niches. Contributing their perspectives are: Paul Woods, energy and utilities industry solutions lead at HP Exstream Enterprise Software; Jennifer Runyon, managing editor of RenewableEnergyWorld.com; Harry Stephens, president and CEO of Datamatx Inc., a national outsourcing provider in the distribution of critical business communications and payment services; Jason Hayes, communications director for the American Coal Council and editor in chief of American Coal Magazine; Linda Jackman, group vice president of industry strategy for Oracle Utilities; Ernie Hayden, managing principal of energy security for Verizon; Anand Babu, director of platform strategy and marketing at Opower; Mary Jo Rogers, partner at Strategic Talent Solutions; and Teresa Hansen, Electric Light & Power editor in chief.
Renewables Gain Ground in the U.S.
by Jennifer Runyon, RenewableEnergyWorld.com
In 2012, all renewables (biomass, geothermal, solar, wind and hydro) provided 49.1 percent of new domestic electrical generating technology installed for a total of nearly 13 gigawatts (GW) of new capacity (12, 956 MW). By comparison, in 2012 new natural gas-fired electric capacity totaled 8.7 GW (33 percent), and new coal-fired plants accounted for 4.5 GW (15 percent) of the total new installed capacity.
In 2011, renewables had a total installed capacity of 8.5 GW, which means the industry grew more than 50 percent in installed capacity from 2011 to 2012. Renewables accounted for 12.2 percent of total installed electrical capacity in the U.S. in 2011 and grew to 15.4 percent of the total operating energy supply in 2012–again, a slow but steady growth. Growth in renewable energy installed capacity is occurring as total electrical generation is falling. From 2011 to 2012, generation dropped 1.1 percent.
In 2012, more than 3.4 GW of solar power capacity came online, a 76 percent growth over 2011. Solar is the fastest growing new energy source in the U.S. Analysts predicting more than 4 GW of solar will be installed in 2013. Falling solar power panel prices are driving the growth in solar power installed capacity. Prices have dropped significantly during the past five years. In 2008, average price per watt from the manufacturer was about $3, and today average prices per watt are in the 65 cents range. This has strained manufacturers, which is why many have gone bankrupt. It has led to a boom in solar power development, however. Analysts predict pricing will level off by the end of 2013, and manufacturers–those that are still around–will begin to see some profits return.
Wind installations grew the most in 2012 with 10.6 GW of installed wind power capacity that came online. Analysts predict installed wind power capacity in 2013 will be lower than in 2012 because of uncertainty about the production tax credit (PTC) that wind developers rely on to make the numbers work. The PTC, which was set to expire at the end of 2012, was extended in the final hour of 2012, but it was too late to affect developers’ 2013 plans. The industry continues to work itself off the tax credit, and most analysts predict healthy growth will pick up in 2014 and beyond.
Biomass installed capacity increased by 543 MW in 2012; geothermal and hydropower installed capacity increased by 149 MW and 99 MW. These technologies continue to grow but at a slower pace than wind and solar power.
Clean energy also is touted as a job-creating engine with lots of data coming from the solar industry, which releases its solar jobs report each fall. In the most recent report, released in November, the Solar Foundation stated the U.S. solar industry employs 119,016 people–13 percent more than it did in 2011. No other U.S. industry can tout those job growth numbers. During the same period, employment in the overall U.S. economy grew only 2.3 percent.
Should Utilities Build or Buy Software?
by Anand Babu, Opower
Utilities that are successful in driving customer engagement can motivate change in energy behavior. This success requires coordinated investments in customer data analytics, energy reporting, real-time alerting, behavioral science expertise and a unified Web and mobile experience.
Utilities are left with a choice: Build an engagement platform in-house or adapt existing Software as a Service (SaaS) solutions from a turnkey provider.
An increasing number of utilities are choosing SaaS providers because they can build, maintain and operate applications for clients in secure data centers at a fraction of the cost it would take to build a similar platform in-house. SaaS providers charge a recurring service fee that includes future enhancements. This allows utilities to be faster to market, opposed to investing significant time and energy upfront with in-house technologies. SaaS also makes it easier for utilities to scale programs on demand without overhauling existing infrastructure.
Building new applications using in-house information technology resources can take at least 18-24 months because of defining requirements, assembling a team, developing custom software and integrating systems. Also, because more than 80 percent of in-house business analytics projects fail the first time, additional delays are possible. In contrast, SaaS approaches to customer engagement can be deployed in six months or less, enabling utilities to engage their entire customer bases.
Utilities need to investigate the deployment time and total cost of ownership. What will it cost to build, maintain and continuously improve a customer engagement system over, say, three years? When customers switch devices every 12 months and change behavior even more frequently, the half-life of in-house customer engagement investments is short.
As a result, a utility with 2 million households could spend up to $21 million over three years on a customer engagement platform, with more than half of the cost dedicated to the underlying analytics infrastructure. By choosing to buy from a turnkey SaaS provider, that same utility could save up to 50 percent over the three-year period.
What does this mean for utilities? When partnering with a SaaS provider, they tap into greater economies of scale and the expertise gained through other successful customer engagement programs. That provider then can leverage its common platform to share costs and increase server utilization across its network of clients. They also gain access to highly scalable big data infrastructure. SaaS infrastructure, built using technologies such as Hadoop, an open-source platform developed by Google and Yahoo for managing search engine data, can process 35 billion events a month and capture device-level data , which provides utilities with on-demand scale without heavy upfront costs.
Traditional in-house approaches can be favored for reasons beyond cost, time to market or proven business value, in particular for control and flexibility; however, SaaS platforms increasingly offer the best of both worlds. Utilities can take advantage of modern extensibility options to adopt components of a SaaS customer engagement platform while maintaining a unified customer experience.
By embracing a SaaS model, utilities can achieve key operational benefits, including faster time to market, improved cost-effectiveness and on-demand scalability. More critical, an SaaS model helps utilities accelerate progress toward a motivated, engaged customer base and key business outcomes.
Can Coal Make a Comeback?
by Jason Hayes, American Coal Council
Although 2011 and 2012 were difficult for the coal industry, the first quarter of 2013 held good news for U.S. coal producers and users. Fuel switching from coal is slowing or reversing as gas prices climb, and as regulation has affected existing coal capacity and planned coal development, opportunities exist to mitigate or reverse those effects.
In 2012, natural gas prices dropped to record lows of $2 and less. Prices were below cost recovery and were referred to as “unsustainable” for gas producers. Compounding below-cost gas prices, a prolonged national economic malaise dampened domestic energy demand; both factors caused extremely tight competition in generation markets. At the same time, federal and state regulation ladled massive additional costs onto coal mining and utility sectors, forcing the announced closure of as much as 45 GW of coal-fueled generation.
Henry Hub prices have more than doubled from their April 2012 lows of $1.82 per million British thermal unit (MMBtu) to more than $4.20 per MMBtu in April 2013. GenerationHub forecasts that this year Powder River Basin (PRB) producers will regain more than 25 million tons of some 30 million tons they lost to fuel switching and closures in 2012. They further argue that when gas is at $4, displacement of PRB coal disappears, and at $4.50, Central Appalachian coals begin to retake domestic market share from natural gas competition.
Despite the return of more normal fuel prices and fuel switching back to coal, many U.S. utilities plan to close as much as 45 GW of coal-fueled capacity. The continuation of these plans confirms the “war on coal” and reinforces that impending Environmental Protection Agency (EPA) regulations play a significant role in pending coal plant closures.
Utility Mercury and Air Toxics Standards (MATS), the carbon pollution standard for new power plants, the proposed carbon combustion residuals rule, the cooling water intake structures rule, the Ozone National Ambient Air Quality Standards (NAAQS) and the expected follow-up rules to Cross-State Air Pollution Rule (CSAPR)/Clean Air Interstate Rule (CAIR) have not gone away. Those regulations remain the most extensive and expensive list of environmental regulation the coal industry has faced.
The cumulative financial impacts of these regulations are impeding the research, development and implementation of new, more efficient emissions-reduction technologies at existing plants. If it goes forward, the proposed carbon pollution standard–1,000 pounds of carbon dioxide per megawatt-hour of electricity produced–will make it impossible for utilities to propose or build new coal plants.
Legal experts in the energy industry, however, note that the EPA’s approach to carbon regulation has lumped coal and natural gas together as a single-source category. They note that this approach has never been attempted and is unlikely to withstand inevitable court challenges.
Options and opportunities exist, and even Gina McCarthy, President Barack Obama’s nominee to lead the EPA during his second term, has said coal will remain important in the U.S. energy mix and the EPA will be flexible in applying rules for coal power plants.
by Teresa Hansen, editor in chief
The average capacity factor for the 104 plants that make up the U.S. nuclear fleet continues to hover around 90 percent each year; it was 89 percent in 2011, according to the Energy Information Administration (EIA). This is 20 percent higher than geothermal plants, which have the second-highest capacity factor by fuel type. Capacity factors for the nation’s coal-fired and gas-fired combined-cycle plants averaged 61 percent and just more than 45 percent in 2011; wind and solar capacity factors were nearly 32 and 24 percent. The Nuclear Energy Institute (NEI) reports that in 2011 (NEI’s most recent U.S. nuclear plant statistics), nuclear power provided more than 19 percent of U.S. electricity and 63.3 percent of its emission-free electricity, avoiding 613 million metric tons of carbon dioxide.
Despite its contribution to clean, reliable electricity, new nuclear plant construction is nearly nonexistent in the U.S. Southern Co. and SCE&G are constructing two units each and are the first utilities to break ground on new nuclear plants since 1974.
Southern Co.’s work on Vogtle 3 and 4 is more than halfway through the project schedule, said Tom Fanning, Southern Co. CEO, during an Electric Light & Power interview published in the Nov/Dec 2012 issue. Rumors are circulating that costs are more than planned; however, Fanning said the facility is still less than the original certified amount. Vogtle Units 3 and 4 are expected to come online in 2017 and 2018.
The first concrete pour at SCE&G’s V.C. Summer Units 2 and 3 in South Carolina occurred in March. These units are expected to come online in 2017 and 2018. Additional plans for new nuclear include: Florida Power & Light Co.’s Turkey Point Units 6 and 7, expected to come online by 2022 and 2023, respectively; Progress Energy’s Levy County site, with the first unit expected to come online in 2024 and the second 18 months later; and Duke Energy’s William States Lee III facility, with the first unit expected to come online in 2022.
In addition to large baseload units, small modular reactors (SMRs) are gaining momentum. SMRs are a key to the Department of Energy’s Office of Nuclear Energy (DOE-NE) Research and Development Roadmap. The DOE-NE’s Small Modular Reactor Licensing Technical Support program announced in 2012 that it would focus on “advancing the licensing and commercialization of domestic SMR designs that are relatively mature and can be deployed in the next decade.” The DOE plans to provide $452 million during the next five years to approved program participants.
Babcock & Wilcox Co. subsidiary B&W mPower signed a cooperative agreement with the DOE in mid-April to receive the program’s first funding. The DOE expects to make available some $150 million to the program during the next five years. B&W mPower is working with the Tennessee Valley Authority to locate the SMR at its Cinch River site.
Uncertainty and questions surrounding nuclear waste disposal and spent fuel storage still plague the nuclear power industry. The Blue Ribbon Commission on America’s Nuclear Future, formed at the president’s direction in January 2010 to review “policies for managing the back end of the nuclear fuel cycle and recommend a new plan,” submitted its final report to the energy secretary in January 2012. Many of the recommendations about long-term storage and disposal require action by Congress and the administration.
Utilities Need Effective Communication to Gain Consumer Support
by Paul Woods, HP
As the amount of homes and businesses increase globally, so will the need for electricity, especially considering the domestic appliances and electronics people depend on daily for leisure and comfort. According to ExxonMobil, the U.S. demand for electricity is expected to rise some 30 percent by 2040, and amid diverse energy sources to meet this demand, utility providers have an opportunity to pursue clean sources for energy production.
Fossil fuels are the main source of energy production in the nation, accounting for some 80 percent, according to BU Today, the Boston University news source, but they increasingly contribute to air pollution and are targets for climate change concerns. The challenge for utilities is finding and integrating a clean energy source that minimizes negative environmental impacts, makes it easier for consumers to manage their energy usage and helps utility providers meet demand.
Renewable energy continues to grow as a viable source of electricity that provides few emissions and, as storage technologies improve, a vast amount of supply. Renewable energy has the potential to contribute stable energy prices, but it faces several challenges in its advancement, most notable advocacy and consumer awareness, according to the Union of Concerned Scientists.
Thirty states and the District of Columbia enforce some level of renewable energy portfolio standards, according to the Energy Information Administration. Several of those states are exploring options to repeal these standards; many agree that demands for electric supply should derive from a free market. Power transmission lines, however, are attracting opposition, and opposing groups are steadily emerging.
Most notable, consumer awareness of renewable energy is low. Eighty percent of consumers indicated they support renewable energy, but only 1 in 6 consumers are aware of greener options provided by electricity suppliers, although nearly half have options available to them, according to the Database of State Incentives for Renewables & Efficiency. Consumer awareness and advocacy can play a vital role in the progression and adoption of renewable energy.
Most consumers think about their utilities during three instances: turning on or transferring existing services, paying their monthly bills and reporting outages. To gain support for renewable energy integration, conversations must precede a call to action. Utilities have an opportunity to alter their communications from a reactive to proactive state.
ComEd is one example of a utility that is engaging consumers. ComEd created the ComEducation Cube, a mobile exhibit that travels to community events to educate consumers about the smart grid. The exhibit offers a classroom where consumers learn about smart meters and direct questions to ComEd experts.
Utility providers also have an opportunity to engage consumers through customer communications. Consider several communication strategies when seeking increasing consumer engagement around renewable energy:
- Tweeting and sharing. Social media platforms such as Facebook and Twitter provide utilities an opportunity to reach millions of users and address consumers’ concerns and misconceptions while gaining support of energy efficiency programs, energy audits and more. Georgia Power frequently uses Facebook to update its consumers on breaking news, such as the April explosion at Plant Bowen, and also to provide tips to lower electric bills.
- Going mobile. Mobile devices play a role in customer communications, providing consumers’ access to Web portals and high energy alerts via email, text messages or apps. While alerting consumers on their energy consumption, utilities have an opportunity to incorporate educational material around renewable energy. Implementing a mobile strategy via a mobile app provides customers with a fun, interactive way to learn about renewable energy and share ideas about conserving energy. ComEd is practicing this strategy by providing customers with a mobile app that serves as an interactive game and educational tool for consumers to better manage energy usage.
- Virtual town halls. Wichita, Kan., hosts virtual town halls where leaders and citizens discuss topics such as how citizens can conserve water or details regarding new construction projects across the city. Leaders within the renewable energy environment have the opportunity to host virtual town meetings via Google+, which offers consumers real-time, face-to-face engagement on the state of renewable energy and the options available.
Engaging consumers through customer communications is vital to break through barriers.
Transforming Utilities With Big Data
by Linda Jackman, Oracle Utilities
Big data shows strong signs of being the transformative cornerstone of utilities. It is forcing utilities to examine how they look at information strategy, operational structure and customer engagement.
In utility operations, greater use of data mining and intelligence can assist in optimizing budgets; controlling costs; and improving asset and grid reliability, crew efficiency, asset maintenance, investment performance and customer satisfaction.
For example, meter interval data is being used for operational efficiency and customer satisfaction. Data analysis, for example, including pattern detection, can identify meter tampering and service bypass conditions remotely, including the estimated utility income lost.
Using predictive analytics to leverage meter data, social media and other customer interactions, a utility can create dynamic segmentation to improve response to marketing campaigns. In addition, pricing programs for energy can be developed either to drive conservation or change customer usage patterns to maximize the use of the existing utility infrastructure.
Oracle began tracking big data and its effect on utilities in 2012. Utilities with smart meter programs said they are somewhat prepared to manage the new data, rating themselves a 6.7 on a scale of 1 to 10. The biggest challenges lay in the lack of talent to execute data analysis and limited processing speed. It was also noted that there was struggle to report information to business managers in a timely manner and missed opportunities to deliver useful information to customers.
Many utilities define an enterprise information strategy to gain better understanding of how they can extract value from data across the utility and how that information can be used to serve customers better.
Besides setting an enterprise information strategy in place, utilities should begin to look at their overall structure and make changes where necessary to take advantage of new data flow. This might include more interdepartmental integration, more information and data sharing across departments or other concerted changes in a collaborative effort to approach asset management and customer interaction more proactively. In an era of particularly tight budgets and increased customer expectations, a proactive approach can provide numerous positive efficiencies.
Along with a more collaborative approach to utility operations, big data is the concept of collaborative analytics in which utilities can use cloud technologies to share and test analytical information and best practices across the industry. This type of analytics offers a unique opportunity in an industry that normally doesn’t share information.
Securing the Smart Grid– Focus on the Layers
by Ernie Hayden, Verizon
As the smart grid has evolved during the past five years, questions concerning security continue to swirl on how to protect the critical infrastructure from a hack or attack.
In December 2007, Congress passed and the president signed into law Title XIII of the Energy Independence and Security Act of 2007 (EISA). It created the foundation for the smart grid. EISA provided the legislative support for the DOE’s smart grid activities and reinforced its role in leading and coordinating national grid modernization efforts.
Smart grid security can be defined and segmented into four layers of concern: physical protection; cybersecurity and defense; data privacy protection; and data management and storage.
- Physical layer. How are the smart grid components and supporting infrastructure protected physically?
- Cyber layer. How are the smart grid components and systems protected from cyberhack and cyberattack?
- Privacy protection layer. How is the smart meter data protected so a customer’s privacy is not harmed?
- Data management and storage. With the extensive data generated by the smart grid, how do you protect it?
In the physical layer there have been some recent attacks on smart meters in which parties simply placed magnets on the outside of the meter housing which affected the ability of the meter to collect usage data while power was still provided to the customer.
As for the cyber layer, don’t forget smart meters, smart sensors and advanced communications devices. Essentially all computers and microprocessors can be subject to cyberattacks. It is important to guard against cyber tampering along with physical assaults.
Maintaining privacy of personal information is a top priority for utilities. For instance the state of California has mandated that smart meter data for electric and gas meters is subject to privacy protection. In addition, Future of Privacy Forum (FPF) and TRUSTe is a great example of how the utility industry can take steps early to address customer data privacy concerns. These organizations recently announced a first-of-its-kind privacy seal program for companies using consumer energy information. The seal will be available to firms offering home energy management, remote home control or security, smart thermostats and other services that depend on access to consumer energy data, whether that data comes from a smart meter or from in-home sensors.
As the smart grid evolves, utility executives must address the massive amounts of data generated by smart meters, and intelligent devices must be managed, protected and stored. Utility executives will need to address the issue before data is lost, damaged or stolen. With privacy rules’ surfacing, the simple storage of data also requires focused security.
The leadership role for smart grid security oversight recently was assumed by the Smart Grid Interoperability Panel (SGIP), an organization with a mission to provide a framework of standards for smart grid devices and systems.
The smart grid can be complex. But looking at the layers can help executives and regulators better understand key aspects of smart grid security. With diligence and an eye to securing the layers, a smart grid can be made more secure.
The Proper Way to Secure Data
by Harry Stephens, Datamatx Inc.
Every company has access to sensitive information regarding its customers. As a result, it is critical to have controls that protect customer data and company information. The slightest data breach can lead to irreparable damage to a company’s reputation, lawsuits and regulatory fines.
There might be vulnerabilities within your own operations that frequently lead to accidental privacy violations, which can be equally damaging. Security risks are involved with employees’ taking work home with information on laptops and portable USB devices, for example. Does your company have a system and policy that ensures employees are shredding all sensitive documents or have limited access to sensitive data?
When determining how well your company identifies and tackles the risks of data loss, ask the following questions:
- Are the appropriate resources readily available to do an effective assessment of risk and install more effective controls if necessary?
- Is redundant customer data disposed of securely?
- How is customer data stored in electronic databases?
- Are the proper controls in place to limit access to customer data and prevent it from being misused, lost or stolen?
How the questions are answered might clarify the necessary next steps. Many companies outsource their document processing, distribution and billing solutions to third-party providers certified in operational excellence and security. If that is the case, it is important to ascertain if the third-party provider is independently certified in the industry standards mandatory to security compliance.
The top three certifications to inquire about are:
- SSAE 16, Type II (Statement on Standards for Attestation Engagements No. 16) Certification. SSAE 16 is an accreditation awarded by the American Institute of Certified Public Accountants and ensures that outsourced documents are handled in a secure, reliable and stable environment with tight process controls.
- PCI DSS 2.0 (Payment Card Industry Data Security Standard) Compliant. The PCI DSS is a globally instituted security standard for all merchants and service providers that accept credit card information; it is designed to keep customer payment card data secure and prevent payment cardholder data fraud.
- Sarbanes-Oxley (SOX). Any organization fully trained in SOX regulations ensures its clients comply with all corporate accounting controls required by U.S. federal law.
Protecting and ensuring compliance requires 24/7 monitoring of data, networks and internal processes. The security of data should be priority, implementing the proper protections, whether internally or by partnering with a third-party provider.
The Liabilities of Shale Natural Gas
by Mary Jo Rogers, Strategic Talent Solutions
By most accounts, natural gas and electricity prices are not expected to increase much during the next 20 years or more, barring dramatic shifts in supply and demand. Experts, however, acknowledge potential disruptive factors might alter the gas pricing landscape. The most often mentioned disruptive influence on the price of natural gas is increased regulation.
The current regulatory environment has yet to cause changes in natural gas prices in the short-term or long-term estimates. Any regulatory changes would be the result of perceived or real liabilities. Three potential liabilities of shale natural gas that could result in increased regulation and rising prices are safety, environmental impact and the political environment.
Safety. Americans seem to have a high tolerance for injuries and deaths caused by natural gas pipeline explosions. The most recent major U.S. natural gas explosion occurred Feb. 20 at a Kansas City restaurant. It resulted in one fatality and 15 injuries. A work crew that was excavating near the restaurant hit a main gas line, which leveled the building. The Kansas City Star questioned the timeliness of the restaurant evacuation and use of shutoff valves, the last line of defense in a pipeline explosion.
According to the National Transportation Safety Board (NTSB), eight natural gas pipeline accidents occurred between 2000 and 2010 in the U.S. These large natural gas transmission line accidents typically included explosions and fires and at least one fatality for a total of 28 fatalities during that period. As the Kansas City explosion and a large 2012 explosion and fire in West Virginia illustrate, significant accidents have occurred at about the same rate.
Natural gas prices have not been affected adversely by accident or increased regulation. Prices have decreased because extensive shale reserves are accessible through fracking. Increased attention to potential safety issues and increases in regulation tied to safety, however, might come about as a corollary to the building of additional pipeline infrastructure to transport all the additional shale gas.
Environmental. In 2012, the Electric Power Research Institute (EPRI) issued a summary report on air quality impacts from natural gas extraction and combustion. The paper highlights knowledge gaps in many areas, including particulate matter emissions and improved measurement of all emissions, including during shale gas extraction and power plant startup and shutdown. No conclusions were drawn, and the author states that ongoing air quality research is underway at EPRI.
In a peer-reviewed scientific journal, a study from Cornell University on “Methane and the Greenhouse-gas Footprint of Natural Gas from Shale Formations” presents specific data and informative comparisons. The authors compare the impact of shale gas to conventional gas and coal in methane and CO2 releases. Methane is a more potent, greater global warming threat than CO2. Methane diminishes more quickly in the atmosphere than CO2 but has a greater impact on global warming, especially in the decades after emissions.
The authors found that the life cycle of shale natural gas has a much greater air quality impact (in methane and CO2) than conventional gas and coal. Much of the natural gas produced is coming from fracking shale reserves, which has a greater greenhouse gas footprint than conventional gas and coal.
Political. Significant movement has been made in the increased regulation of air quality impacts from coal-fired power plants across the country. In contrast, shale natural gas development and political battles surrounding fracking vary by state. It remains to be seen whether federal restrictions are coming.
There are some potential liabilities in safety, environmental impact and political changes for increasing regulation of shale natural gas, and in turn, gas prices.