RMEL Electric Energy Issue 2 2013

spotlight on critical energy issues

the battle of the century

reliability regulation

OVER

vs.

Len Rodman on a U.S. Energy Policy Taking the Industry to Washington Natural Gas: Good, Bad, Ugly Safety Leadership Best Practices Renewable Energy Financing Electric Power System Reliability

ISSUE 2 / 2013 www.RMEL.org

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contents

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28

20 34

Features 10 Is a Consensus U.S. Energy Policy Outside Our Reach?

By Len C. Rodman, Chairman, President and CEO, Black & Veatch

16 Politics & Utilities: Taking an Industry to Washington

40 Best Practices in Electric Power System Testing for Improved Availability

By Mark Siira, Director, Business Development, ComRent

By Robert Talley, President, Talley & Associates, Inc

20 Disintermediation: The Good, The Bad and The Ugly of Natural Gas

By William Pentland, Director, Energy Markets & Regulation, World Alliance for Decentralized Energy

28 Leading for Safer and More Civil Work Environments

By Jim Walters, EdD, Owner, Power of Learning, Inc.

34 Renewable Energy Financing through Public Capital

By Michael Mendelsohn and David Feldman, National Renewable Energy Laboratory

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Departments 06 Board of Directors and Foundation Board of Directors 08 2013 Executive Leadership and Management Fall Convention 44 RMEL Membership Listings 48 2013 Calendar of Events 50 Index to Advertisers

Power Generation Oil & Gas

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rmel information

RMEL Board of Directors

Foundation Board of Directors

Officers

Directors

Officers

Board of Directors

President Andy Ramirez El Paso Electric Company VP, Power Generation

Doug Bennion PacifiCorp VP, Engineering Services & Capital Investment

Cathy McCartney LEADERSHIP A Business Imperative, Inc. Owner/Consultant

President Elect Dan Schmidt Black & Veatch Corp.

Sr. VP, Power Generation Services

Tim Brossart Xcel Energy VP, Construction Operations & Maintenance

President Steve Bridges Zachry Holdings, Inc. VP & General Manager, Regional Projects Group

Past President Kelly Harrison Westar Energy VP, Transmission Vice President, Membership Scott Fry Mycoff, Fry & Prouse LLC Managing Director Vice President, Education Tony Montoya Western Area Power Administration, COO Vice President, Finance Stuart Wevik Black Hills Corporation VP, Utility Operations Vice President, Vital Issues Richard Peña CPS Energy Sr. VP, Energy Development Vice President, Member Services Mike McInnes Tri-State Generation and Transmission Assn.

Sr. VP, Production

Mike DeConcini UNS Energy Corporation Sr. VP, COO Jon Hansen Omaha Public Power District VP, Energy Production & Marketing Mike Hummel SRP Associate General Manager

Vice President, Finance Rebecca Shiflea SAIC Senior Project Manager Vice President Walter D. Jones Intermountain Rural Electric Assn.

Assistant General Manager, Operations & Engineering

Michael A. Jones SRP Director

Cheryl Mele Austin Energy COO Mike Morris Zachry Holdings, Inc. VP, Business Development, Engineering Jackie Sargent Platte River Power Authority General Manager Neal Walker Texas New Mexico Power President Rick Putnicki RMEL Executive Director Secretary

Staff Liaison Natalie Andersen RMEL Manager, Member Services

H. Kent Cheese TestAmerica Laboratories, Inc. Director, National Accounts Mike McInnes Tri-State Generation and Transmission Assn.

Sr. VP, Production

Staff Liaison Rick Putnicki RMEL Executive Director

Chair, Fundraising James Helvig AMEC Director, Power Delivery

Tom Kent Nebraska Public Power District VP & COO Tammy McLeod Arizona Public Service VP & Chief Customer Officer

Dennis Finn Wärtsilä North America, Inc. General Sales Manager, Mtn Region

P u b l i s h e d b y:

www.RMEL.org Published Summer 2013 Published For: RMEL 6855 S. Havana St, Ste 430, Centennial, CO 80112 T: (303) 865-5544 F: (303) 865-5548 www.RMEL.org

Kathryn Hail editor (303) 865-5544 kathrynhail@rmel.org Electric Energy is the official magazine of RMEL. Published three times a year, the publication discusses critical issues in the electric energy industry. Subscribe to Electric Energy by contacting RMEL. Editorial content and feedback can also be directed to RMEL. Advertising in the magazine supports RMEL education programs and activities. For advertising opportunities, please contact Deborah Juris from HungryEye Media, LLC at (303) 883-4159.

www.hungryeyemedia.com 800.852.0857 Brendan Harrington president Deborah Juris publisher (303) 883-4159 deborah@hungryeyemedia.com Lindsay Burke creative director & ad production

Aaron Cessna Alithea Doyle designers

Susan Humphrey project manager

Dave Baker copy editor

Register for the 2013 Fall Convention sept 8-10, 2013 marana, Arizona

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2013 fall convention

RMEL’s 110th fall convention to tackle burning issues of the industry September 8-10, 2013

The Ritz-Carlton, Dove Mountain | marana, az

Join electric energy industry senior executives for RMEL’s 2013 Fall Executive Leadership and Management Convention Sept.

8-10 in Marana, AZ. The theme of RMEL’s 2013

110th Annual

Executive Leadership and Management

Fall Convention is The Heat is On – Burning Issues

September 8-10, 2013 The Ritz-Carlton, Dove Mountain | marana, az

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elec tric energy | summer 2013

Facing the Electric Utility Industry. »

T

he RMEL Fall Convention attracts over 300 senior-level utility managers and executives. Find chief executives, company officers, vice presidents, general managers, decision makers and senior management of energy companies at this event. Attendees represent the many utility ownerships including IOU, G&T, municipalities, cooperative and government agencies.

A keynote address by

Phillip Van Hooser, President, Van Hooser Associates, Inc., will discuss the things every leader ought to know – like how to earn an employee’s respect, how to be truthful and how to make good decisions. New leaders, mid-level managers and executives – any leader who is feeling the pressure to perform — will discover the often unspoken ground rules of establishing strong leader-follower relationships in this presentation.

While doing case studies in the late 1960s on very large, complex projects, Hans

Bleiker, Institute for Participatory Management and Planning, stumbled across some public-sector managers who were amazingly effective. These ‘Implementation

Geniuses’ could get projects implemented that routinely were torpedoed by NIMBY (Not In My Back Yard) opposition. From that time on he’s worked to systemizing the tactics that ‘Implementation Geniuses’ appeared to be using, they can teach their amazing Consent-Building tactics to public-sector professionals throughout the country. The strategy is called SDIC: Systematic Development of Informed Consent. It is a fundamentally different approach to public involvement.

Reliability is critical to the electric utility system, but regulatory overreach is a huge concern for electric utilities. Directives from the EPA, FERC, NERC and other regulatory bodies will impact electric rates. What are all the sides to the story? Is there a communication disconnect?

Robert Talley, President, Talley & Associates, Inc, Vicki Patton, General Counsel, Environmental Defense Fund, Jim Hunter, Director, Utilities, IBEW and a regulatory panelist, will discuss ways utilities, regulators, environmental groups and unions can better work together to achieve more efficient system reliability.

The barrage of pending regulations, economic uncertainty and ever-increasing speed of communication are pushing electric utilities to act faster than ever before.

Ken Anderson, General Manager, Tri-State Generation & Transmission Assn., Paul Bonavia, Chairman, President & CEO, Tucson Electric Power, Jackie Sargent, General Manager, Platte

River Power Authority, David R. Emery, Chairman, President & CEO, Black Hills Corp. and Mark Gabriel, Administrator, Western Area Power Administration will share their strategies for moving forward with today’s biggest industry challenges during this panel.

The electric utility industry is entering perhaps the most disruptive chapter in its history. A myriad of novel changes are coming to the industry. These point to the need for a new business model and, importantly, a new regulatory model.

Ronald Binz, Principal, Public Policy Consulting, will discuss his research and recommendations from the Utilities 2020 project and describe the state of play of the development of new utility business models.

Jill Tietjen, President & CEO, Technically Speaking, Inc., will cover resource planning for an aging coal fleet. What can utilities do with an aging coal fleet over the next 10-20 years? How can renewables be integrated into the generation mix, and what role does water play?

The natural gas revolution is having a profound impact on U.S. consumers and industries, including power generation and utilities.

The need for greater energy security and resiliency in the wake of Hurricane Sandy is driving a broad range of customers to adopt clean and efficient on-site power technologies. What is the future outlook for natural gas supplies, LNG exports and the impact on the power sector?

Will distributed generation lead to the utility death spiral with customers leaving the system and rising costs for those who remain? David

Sweet, President of the Natural Gas Roundtable and Executive Director of the World Alliance for Decentralized Energy, will address these and other issues during this session.

EPRI has been studying the combined impact of current and potential environmental policies, including potential CO2 emissions policies, on the economics and future deployment of electric power generation technologies.

Revis W. James, Director, Generation R&D, Electric Power Research Institute, will address EPRI’s insights regarding ongoing transformation in the U.S. generation fleet in response to regulatory and other drivers.

The Fall Executive Leadership and Management Convention is a three-day event that begins on a Sunday with a golf outing followed by an evening reception hosted by the RMEL Champions. Monday is a full-day of educational presentations ending with an RMEL Champions reception, dinner and the RMEL Foundation Silent Auction.

The final day includes the RMEL annual meeting and a half day of presentations.

A guest program, awards presentation and plenty of time to relax and network are also part of the tradition.

Go to www.RMEL.org for more information and registration. w w w. r mel .o rg

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Is a Consensus U.S. Energy policy

Outside

reach? our

B y L e n C . R o d m a n , C h a i rm a n , P re s i d e n t a n d C E O , B l a c k & V e a t c h

I had a conversation recently with a professor, who also formerly worked for the U.S. Department of Energy.

The gentleman asked me what “drives� our clients at Black & Veatch. I responded by naming some of the issues that are, in fact, preventing electric utilities from moving forward. My list included a lack of consistent policy direction from the government, lack of funding options to make long-term capital investments and the difficulty in making decisions under these circumstances, given that these choices affect the companies for the next 20 to 60 years.

He responded with surprise. The U.S. government has set a very clear policy on energy, he told me, and he listed more than a half dozen regulations that the administration had put in place that provided strong direction and

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focus. It was enlightening to see that perspective and gain a better understanding of how the U.S. government functions in Washington, D.C., but in the end, I had to tell him, “Sorry, but many of our clients just don’t feel that way.” You could Len c. rodman say we agreed to disagree.

It seems to me that our conversation quickly encapsulated the current situation that exists across the United States. Our discussion turned out to be a good synthesis of the dilemma the electric power industry finds itself in when it comes to overall strategic direction, policy and decision-making.

Why can’t the United States have a clearly outlined statement for an energy policy—one that won’t change every two years? In fact, is it unreasonable to ask for direction the industry can bank on for the next 10 or 20 years? Certainly that is what the industry wants.

A Congressional Mandate When deciding major issues, history tells us that comprehensive congressional action is preferred to executive-branch rulings. It seems to me that more people can stand behind a congressional act, and it more closely follows how any law is drafted, debated, decided and implemented. It is based on the fact that elected members of Congress are accountable to their constituents; appointed regulators are not.

The current administration is using the inability of the U.S. Congress to agree on almost anything to push its own environmental policy through new regulations, implemented via the Environmental Protection Agency (EPA) or the Department of Energy (DOE). Yet Congress has not set forth a clear policy, and that causes issues for the power industry. I told my professor friend that not having a clear statement of energy policy is indeed a policy itself. Another way to say it is we may have 1,000 regulations but not a policy.

The problem, of course, is that these regulations are piecemeal and do not really contribute to providing an overall direction that utilities can plan on for the coming decades. However, this is where the country is, politically speaking, and it does not appear that it will change anytime soon.

An Energy Policy Framework The industry can still put forth ideas on formulating an energy policy framework. It would be healthy for the industry to have a consensus opinion on these overriding topics so that utilities can plan and anticipate some consistency over a long period of time.

An energy policy should be very forward-looking and thereby provide the direction utilities need. Not only do utilities need these guidelines, but so do the regulators, lawmakers, industrial

customers and consumers. Imagine if we were all on the same page!

Here are some major categories that an energy policy framework could consider: » Energy assurance: This would

relate to our long-term future of resource supplies, how much is imported and exported, and how we assure that the supplies remain affordable. » Energy reliability: We should have the absolute

highest standards for reliability, but it should never be assumed that this is a “given.” In fact, some would say we are vulnerable. Our transmission capabilities need to expand with our demand growth, and we need to build more resiliency into our systems. » Environmental and sustainability issues: We

must protect our environment and be good stewards of what has been entrusted to us. There are multiple greenhouse gas and carbon standards proposals floating around, and carbon taxes have been discussed for a number of years. Some firm direction must be provided. » Renewable energy goals/targets: Nearly

40 states now have Renewable Portfolio Standards (RPS), either mandated or expressed as goals. Should this remain a state decision, or should there be some nationwide targets set? What should that look like? » Water and its nexus with energy: Water and

energy are inextricably linked, and we should have coordinated guidelines so that as we consider future energy infrastructure, we consider its impact on water. Likewise, as resources for water are debated and planned, its need for energy should be part of the equation. Are there ways to encourage water and electric utilities to work together more often? For instance, water reuse is one way of solving water needs for power plants, and it has been successfully implemented in limited locations across the country.

Could an energy policy encourage more expansion? » Financial and capital investment: Cost is a

huge factor in decision-making for utilities, yet it is easy to pass regulations or mandates that are unfunded or place a huge financial burden. An energy policy could help put more focus on the cost of technologies and allow better mechanisms for rate recovery. w w w. r mel .o rg

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» Cyber security and the power grid: Of all

the issues on the list, this is probably the closest that Congress could actually come to agreement on. It is easy to put an “enemy’s face” on cyber security matters. National security has a way of bridging partisan politics. Specific guidelines to protect our infrastructure would ensure better future security. » Natural gas and hydraulic fracturing:

This feeds into the generation mix of future power.

Currently, fracking regulation is being driven by the states, but the federal government is clearly looking for ways to assert its jurisdiction. Right now, fracking and water-quality issues are mostly based on state laws that specifically pertain to mineral ownership.

State geographies differ greatly, as do constituencies.

This is a broad list of topics we should be actively discussing, and, of course, other topics could be added. Such an overall policy could provide enough guidelines—or boundaries, if you will—that it gives a reasonable test for various proposed solutions. These guidelines could be helpful for anything from an EPA proposal to a local electric co-op board decision.

Single-Fuel Dependence It is great that today’s natural gas technologies appear to be offering hope of fuel independence for many decades to come, perhaps the next century. The United States could find itself a net fuel exporter. However, we also seem to be going down a path toward single-fuel dependency.

Fuel diversity has always been a hallmark of most utilities.

They understand that prices can be volatile and that events— such as hurricanes or accidents—can instantly alter supply availability. Flexibility in fuel choice equates to lower and more affordable rates to customers. In short, it is one way of being a good steward of these resources.

However, we seem to be disregarding many of the lessons of the past and instead are going full throttle for natural gas. We are doing this despite some limitations on our current pipeline transmission infrastructure, plus wild swings in prices on the spot market, such as what we witnessed in New York City in January.

But an energy policy, framed by Congress, could outline some general guidelines on fuel diversification. It could discuss targets for natural gas, nuclear, coal, renewables, hydro, geothermal and biomass, and even make statements toward undeveloped technologies such as wave and tidal energy. That could provide many answers and future direction.

Incentives We’ve used incentives as a carrot to launch wind and solar. For instance, without production tax credits and investment tax credits—along with RPS—we simply would not see the large number of wind and solar farms scattered throughout the Midwest and Southwest. Wind and solar would still be fledgling industries.

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elec tric energy | summer 2013

Let’s say we had a congressional policy framework stating that X percentage of the country’s energy would come from renewables by Y date. That would be a policy that would provide direction. We can then devise strategies and incentives for meeting those goals and implement tactics to get us on that path.

Greenhouse gas (GHG) reduction and carbon taxes are another example. GHG reduction is an offshoot of climate change and global warming legislation. It is clear the regulations put forth by the current administration are bent on disenfranchising fossil fuel. So if we’re going to penalize fossil fuel, wouldn’t it make sense to likewise incentivize ways to make carbon capture and sequestration (CCS) a commercial reality?

If the intent is to allow “clean” coal with CCS, then offer more incentives to advance CCS technologies so that coal can once again be economically used. As it stands, CCS takes a 30 percent auxiliary load from power generation, which is too much power for a plant to lose and still be profitable. Experts say auxiliary load should be at about 15 percent to make it commercially viable. So can we provide some incentives to boost CCS research and technology advancement? An energy policy could provide some guidelines for incentivizing and making CCS work.

Interestingly, Black & Veatch’s current Energy Market Perspective, which takes a 25-year look at future energy supply and pricing, is based on projecting a carbon tax starting in 2020 at $13 a ton. Proposed new-build carbon emissions standards by the EPA are out of reach for coal without CCS, but they come just under the threshold for natural gas combined-cycle plants.

Over the past several years, tax credits have been very effective in boosting various technologies. My hesitation with them is that their use means the government is picking technology winners and losers. But even if we extended tax credits long enough to push renewables to a 20 percent U.S. market share (we’re currently at about 5 percent, not counting hydropower), what about the remaining 80 percent? Tax credits can only go so far.

Cross-State Transmission Lines One hot topic being debated within the industry is whether there should be easier permitting for transmission lines that need to cross state lines. What should the Federal Energy Regulatory Commission’s (FERC) role be in this issue? We have a power grid in this nation that must be expanded in order to gain more reliability and assist flexibility in times of devastating storms, such as Superstorm Sandy.

FERC is trying to get the country integrated into a national electric grid. The agency wants a more efficient grid and new transmission lines, which it sees as critical to the economy.

There are attempts to streamline permitting. To make a national grid, there must be effective state interaction, or a “bigpicture” decision by FERC. But this has become a “state versus the federal government” issue. States want to retain control over large transmission lines and right-of-ways, as well as environmental permitting.

Perhaps a more coherent energy policy could bring parties together with some basic parameters of what a strong national grid would look like, then allow that to be a guiding principle in deciding future transmission lines.

Bipartisanship Can we really expect to get members of Congress from both sides of the aisle to agree on national energy strategies and guidelines? The Bipartisan Policy Center (BPC), a nonprofit group established by several prominent former senators, provides an answer—yes!

Earlier this year, the BPC issued a report mapping out several areas of agreement in energy. It included more than 50 specific recommendations, all wrapped around four basic objectives: 1) pursuing a diverse portfolio of energy resources; 2) improving the energy productivity of the U.S. economy; 3) accelerating innovation and technology improvements across the energy sector; and 4) improving energy policy governance and accountability.

You can find the report at www.bipartisanpolicy.org.

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policy should look like? Is there enough of a consensus that those within the industry could agree on some guidelines to help formulate clear direction?

The industry has struggled with that for a variety of reasons. Ownership is one of the core issues when you consider the broad range of industry players, including investor-owned utilities (IOUs) and municipality-owned and rural coops, along with federal power agencies, merchant producers, independent transmission companies and a growing number of self-generation operations. All these groups have a keen interest in reliability and providing low rates for their customers.

But there are added interests to consider, including the need to attract investors or capital and provide adequate returns on those investments. In many cases, it is also a matter of following the law (e.g., RPSs, etc.). The balancing entities in this then become the various state public utility commissions.

Can these various ownership groups and operating entities find some common ground? The overriding topics listed previously should, for the most part, apply to any entity that provides electrical power.

Another issue that keeps utilities from speaking with a more singular voice is geopolitical differences. Certain portions of the country are dependent on coal for reliable and affordable power. The move away from coal is seen as a threat to low operating costs for their manufacturing and business customers. Other portions of the country have much less coal generation and instead rely mostly on natural gas, nuclear or perhaps some renewables. Those areas are focused more on environmental issues and are willing to sacrifice lower prices for fewer emissions. These differences are creating a hurdle that will take strong willpower to overcome.

A Clear Direction There is no question that the electric power generation industry wants a clear understanding of what will affect its future. The industry is looking for policy-makers to cast a vision, one that clearly understands the impacts of decisions on multiple fronts. The electric industry wants something that will be in place for the next 10 or 20 years.

Of course, some businesses thrive on volatility and uncertainty. That is inevitable. But the electric industry is not in that boat—it needs clearer direction and more certainty. A comprehensive energy policy would provide insights on how to accomplish that.

Len C. Rodman has been Chairman, President and Chief Executive Officer (CEO) of Black & Veatch Holding Company since January 1, 2000. Rodman has overall responsibility for initiatives to maximize value of the company and drive value creation for each of our stakeholders – clients, professionals, shareholders and business partners. He can be reached at BVCorpComm@bv.com.

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politics & utilities

Taking an Industry to

Washington R o b e rt Ta l l e y, p r e s i d e n t, ta l l e y & a s s o c i at e s , i n c

U

nderstanding Washington, making sense of the process and working within the beltway can all be daunting and, at times, frustrating. Federal regulators and the U.S. Congress play by a set of rules that are at best arcane and at worst unfathomable. Combine arcane rules with a work schedule that is regularly interrupted for any number of reasons, such as a natural disaster, a national security issue or even a death of a colleague—and the frustration can be palpable. Add to this the circus-like atmosphere that

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surrounds national elections, and the generally negative perception of Washington by industry is understandable.

Frustration has been a long-standing issue in Congress’s history. John Adams, our second president, made his point when he said, “In my many years I have come to the conclusion that one useless man is a shame, two is a law firm and three or more is a congress.” Today, according to recent polling data, Congress is less popular among the American public than lice, colonoscopies, root canals and used car

salesmen. With a favorability rating recently hovering around 10 percent, it is tempting to be dismissive of Congress and all things “Washington,” but this attitude comes with some risk.

In times when policy uncertainty increases, opportunity exists—both good and bad. While there are differences of opinion, the current concerns surrounding the federal fiscal situation appear set to open up a host of issues for federal debate, including large portions of the tax code and, potentially, significant energy issues that relate to federal revenues. Like

monitoring an unattractive growth or keeping tabs on monthly sales data, businesses are well-advised to pay close attention to what is going on in the District of Columbia lest they be caught unawares by a rapid change in the landscape.

As businesses engage in both the legislative and regulatory arenas to meet long-term strategic goals, there are strategies that can be developed and implemented to maximize the opportunity for beneficial outcomes.

Recognizing the Changing Nature of Energy Politics Politics are “officially” defined as the art or science of government, but the term may be better understood as the nexus between policy and people.

Politics engage when policy ideas are viewed through the lens of how they apply to the people. Good politics should identify what policies people want and support those policies. While considerable negative connotations have become associated with the term “politics,” the reality is that good policy ideas are often made better when viewed through a political lens. Unfortunately, too much of a good thing isn’t necessarily good.

In developing energy and environmental policy, the politics of Congress have, over time, changed. Historically, the politics of energy have been regional, not partisan. Resource-rich areas tended to produce congressmen who supported the local economies. More recently, the trend toward partisan voting on energy issues and a polarization of partisan positioning has emerged.

Some of this has occurred as a result of the larger polarization in Congress and some because of changes in the national political landscape and the cementing of interest groups’ involvement in national political parties.

In the context of major energy-related legislation, the trend has been away from developing compromise bipartisan policies. Consider the passage of a few major historical environmental bills: The 1990 Clean Air Act Amendments

passed in the House of Representatives by an overwhelming margin of 401-21 and passed in the Senate 89-11. Superfund passed the House 351-23 and the Senate simply accepted it by unanimous consent. Contrast these landmark bills with a more recent initiative: the effort to develop a federal cap and trade program to limit emissions of greenhouse gases in 2008. The House passed bill, known officially as the American Clean Energy and Efficiency Act, but more commonly called the Waxman-Markey bill, passed the House of Representatives by a vote of 219-212. Passage of such a sweeping piece of legislation, with such broad economic consequences, by the slimmest of margins, added to the problems in securing passage in the Senate.

Not all areas of energy policy are partisan and there may exist additional opportunities for broader consensus. Senate Energy and Natural Resources Committee Chairman Ron Wyden and Senior Republican Lisa Murkowski have developed a working relationship on issues such as hydropower and energy efficiency.

In the House, passage of legislation to address a conflict between Federal Power Act and Clean Air Act requirements in emergencies developed broad bipartisan support after changes made during the Committee process.

Recognizing in advance the increasing political nature of energy policy can help gauge potential outcomes and develop appropriate strategies. Bridging divides between the parties will be a necessary part of any approach.

Corporate goals and objectives may differ across the energy industry, but commonalities exist in developing a good advocacy strategy. These commonalities include clearly defining the objective, a well-developed strategic plan, a well-developed communications plan, effective implementation and realistic expectations.

As your business evaluates its legislative or regulatory agenda and develops its advocacy plan, it is worthwhile

to seek to benefit from the mistakes of others. Devising a plan that avoids the most common errors made by others can help ensure that the program your company follows has the best opportunity for success.

Failure to Clearly and Succinctly State the Objective This sounds so obvious but it occurs so often: Companies come to Washington and are asked “What do you want done?”—and they can’t clearly answer the question. Good advocacy starts with defining objectives that are concrete, attainable and realistic.

It is reasonable to have a top-line objective that generally states: “We will work to foster federal policies that grow our business,” but it isn’t enough. Too general an objective will almost surely be counterproductive, as it will fail to allow for a focused, results-oriented strategic approach to dealing with Congress.

Businesses that want to make the most of applied resources in Washington, will be best served by identifying one, two or three reasonably attainable priorities and focusing on them.

Failure to Develop a Sound Strategy and Stick to It Time horizons for corporate objectives vary, but developing a strategic plan and sticking to it are critical steps, regardless of whether the horizon is 10 years or 10 weeks away. It isn’t enough to come to Washington a few times a year, have meetings and go home. Yes, Washington moves slowly, but there is always someone out there with a different objective. To get what you want, you’ll need to plan a path forward and work that plan.

In developing a plan, recognize that external factors may influence how the plan is implemented; build contingencies and flexibility to address changing circumstances. A good strategic plan will identify the objective

w w w. r mel .o rg

17

and a pathway to reach it. It will be sufficiently detailed to allow for a reasonable assessment of the resources necessary to implement the plan but not overly prescriptive in every detail.

Underestimating the Value and Influence of Staff It can be easy to get caught up in the glamour of basking in the presence of elected officials. The trappings of congressional authority or senior executive staff can be hypnotizing, but often effective outreach to the staff can be just as important, if not more, than direct meetings with congressmen. How many times have I been told “I only want to see the Congressman” by the client? Here is a newsflash: Staff draft the legislation, they write the briefing documents and, in some cases, they have the ability to control how critical information is presented when decisions are made. I’ve even met a few staffers who think they are congressmen. Don’t make the mistake of underestimating the power that staff can wield.

Poor Messaging This is basic communications. The most realistic objective and the best strategic approach are doomed if you fail to recognize and tailor your message to your audience. Communications must be crafted to be understandable and available in “layers”; that is, information defining the goal and presenting the supporting arguments must

be available in increasing detail to meet the level of understanding necessary to make the point. Supporting arguments must be concise and counterarguments to criticisms should be developed and ready in advance of initiating outreach.

More complicated objectives may require multimedia outreach and a separate communications strategy designed to run concurrent with the advocacy strategy. New media resources are increasingly accessible to companies of all sizes for reasonable expenditures. The average Hill staffer is well under 30 years old, doesn’t get the paper and doesn’t watch the nightly news. They get virtually all of their news online and are virtually addicted to social media. The times aren’t changing—they’ve changed, and many corporate communications and lobbying strategies need to catch up.

Only Working Your Strengths Too often people come to Washington planning to play the single trump card to reach an objective. In most cases, a single strength will not be enough to reach an objective. A smart strategy will not only assess strengths—it will also concede corporate or policy weaknesses and develop ways to address them. Whether this is through coalition-building, strategic partnering with entities or organizations that help buttress the weak area or even working to politically link the desired outcome to the fate of another issue, finding ways to backfill weaknesses is part of a successful overall strategic approach.

Not Being Realistic A few years back, a group of lobbyists working on a large energy bill were treated to the complaints of a colleague

18

elec tric energy | summer 2013

whose compensation for the year was tied to the repeal of a specific provision of law. Personally, I’m all for incentive compensation, but the executives in this particular company were unrealistic in their expectations. Washington doesn’t lend itself to process analysis, nor can one expect a detailed Gantt chart to neatly apply to the congressional or regulatory process. Far too many factors influence how and when changes to regulations and laws occur to be concrete with expectations.

Setting goals to benchmark progress is important, but so too is recognizing that Washington’s pace may not fit perfectly with expectations.

Develop Relationships with Decision-Makers Finally, parachuting in at the last minute is perhaps the least effective strategic approach. Developing longterm relationships with decision-makers and building a level of understanding and trust is important. How this is done depends on individual circumstances.

Companies can develop in-house expertise, can outsource to professionals or can combine the approaches.

Regardless of which path is taken, be mindful that the personnel that represent you in Washington are effectively the public face of your company in the policy arena. Who you send into regulatory agencies and Capitol Hill will become a proxy for your company.

Be entirely confident in their understanding of your corporation and its goals, their presentation skills and, perhaps most important, their judgment to react and respond appropriately in all manner of circumstances.

Understanding these common mistakes and developing an advocacy program that is designed to prevent them won’t guarantee success, but it will help put a company on the path toward maximizing resources applied to federal advocacy. Combining a strong strategic approach with the appropriate personnel to make the case for your objective is a sound business investment.

NEBRASKA

Energy Generation Operations program trains students to be entry-level operators Southeast Community College in Nebraska offers an associate degree program designed to satisfy the need for entry-level operators at utility power plants, ethanol production facilities, wind farms, and other process-related industrial sites. The Energy Generation Operations program is taught face-to-face on SCC’s Milford, Neb., Campus. Some courses also are offered online.

This program is intended to train workers to be operators at nuclear, fossil fuel, biofuels, wind, solar, and other types of energy generating facilities, including electrical and fluid fuel systems. SCC designed the program based on common core skills and competencies required by operators at all types of energy production facilities. The program enhances SCC’s Electronic Systems Technology (I&C) and Electrical & Electromechanical Technology programs, which have been supplying highly-qualified technicians and electricians to the utility industry for decades.

The program consists of five quarters of instruction in core competencies common to all types of energy generation operations. The final sixth quarter is our focus quarter in which students choose from Nuclear, Fossil Fuels, or Process Operations focuses. Other focuses can be added as needed in Solar, Geothermal, Hydro, Fuel cells, etc. Because SCC works on the quarter system, students can achieve their twoyear degree in 18 months, providing a faster path to higher employment. This calendar also provides more graduates to the industry in a shorter time frame.

SCC collaborated with various service providers in developing the program, including the Nebraska Public

Power District, Omaha Public Power District, Black Hills Energy, Lincoln Electric System, the Nebraska Ethanol Board, American Wind Energy Association, and the Nebraska Wind Working Group.

Graduates have found jobs in fossil, nuclear, wind, biofuels, and pipeline operations.

What employers say about SCC’s program:

“LES appreciates the foresight at SCC that drove investing the time and resources to bring the Energy Generation Operations program online. Having a local program that Nebraska utilities can help mold to fit their specific needs is a valuable resource that LES is proud to be a part of. The desire to source locally-educated and skilled operations staff for our generation facilities has been met by SCC with this program.”

Brian McReynolds, Generation Operations, Lincoln Electric System “NPPD has been pleased to work with SCC for many years, and SCC has consistently provided us with quality employees. The Energy Generation Operations program is yet another way that SCC has stepped up to continue that commitment by preparing and providing a qualified workforce for Nebraska utilities.”

Dallas Beshaler, NPPD Cooper Nuclear Station

Persons wanting more information about the Energy Generation Operations program should contact John Pierce, jpierce@southeast.edu, 800-933-7223 ext. 8394. Or, if you are interested in hiring graduates, contact Shelly Tolle at 800933-7223 ext. 8242 or stolle@southeast.edu.

www.southeast.edu/EnergyGenerationOperations

Disintermediation

The Good, the Bad and the Ugly of Natural Gas

I

f you want to take the temperature of an industry as large as the utility industry, the U.S. Securities and Exchange Committee’s (SEC) online database of shareholder reports is a great

By William Pentland, place to start. Under Director, Energy federal securities laws, Markets & Regulation, World Alliance for publicly traded compaDecentralized Energy nies, including the vast majority of investor-owned utilities, are required to file quarterly and annual shareholder reports with the SEC. The utility industry’s ambivalence about distributed generation (DG) is a case in point.

“Distributed generation” is one of many terms commonly used to describe generation facilities located close to the load, including solar photovoltaics, microturbines and so forth. Unlike the typical traditional utility-scale power plants, DG is connected directly to the distribution network—or connected through the customer’s meter.

Historically, the term DG—or any of the half-dozen or so similar terms used to describe generation facilities located close to the load—seldom surfaced in SEC filings, other than those filed by companies pursuing niche market applications like backup power for remotely sited cell towers. Indeed, until recently, nearly all investor-owned utilities remained silent on the subject of DG’s potential impact on electric utilities. That silence began to give way to conflicting perspectives on DG’s potential impact on the industry over the past two or three years. In some filings, DG is described as a potential source of future competition that could adversely affect utilities. In other filings, DG is described as an emerging growth opportunity for utilities.

While DG will likely create both risks and opportunities, the former possibility is attracting more attention than the latter. And this tendency exists beyond the rarified world of SEC filings.

By allowing customers to displace power from the grid with electricity

produced on-site, utilities are expressing concerns about declining demand and lost investment opportunity in supply and energy services: The middleman may get cut out.

For example, while speaking at the Deloitte Energy Conference in Washington, D.C. two years ago, Jim Rogers, the chairman and CEO of Duke Energy, said: “One of the biggest risks I see for companies in vertically integrated markets … is what I call ‘disintermediation’ and what it really means is a Google comes in with an idea about improving the energy use in the home and the next thing you know the demand drops 30 percent.”

The definition of “disintermediation” is “the elimination of an intermediary in a transaction between two parties,” according to the MerriamWebster dictionary.

Rogers is not the only person thinking about “disintermediation” in the context of electric utilities.

In April, the Rocky Mountain Institute, a clean energy think tank based in Boulder, CO, sliced-and-diced the grid bypass dilemma from multiple vantage points in a thought-provoking study called “New Business Models for the Distribution Edge.”

“Distributed generation, electricity storage and energy management technologies are advancing rapidly and will eventually give large numbers of customers options to unplug from the grid,” the RMI study said. “As this occurs, the role of the traditional utility monopoly will shrink. This is a natural and perhaps inevitable transition as competitive forces play out in the electricity sector.”

Speaking at the MIT Energy Conference earlier this year, David Crane, the CEO of NRG Energy, characterized the utility bypass risk more provocatively, saying that consumers are realizing that “they don’t need the power industry at all.”

While this scenario may seem like a stretch today, it could become realistic soon depending on how rapidly w w w. r mel .o rg

21

“If the cost of solar panels keeps coming down, installation costs come down, and if they combine solar with battery technology and a power management system, then we have someone just using us for backup,” said Rogers.

“It is obviously a potential threat to us over the long term.”

various technologies become costeffective.

In an interview with Bloomberg News, Rogers described one such scenario where utilities could lose load as a result of new technologies that allowed customers to “bypass” the conventional electric grid.

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Yes, it is a risk. But, it is also an opportunity.

More specifically, utilities could leverage a subset of DG technologies that use natural gas to generate electric power to protect their existing infrastructure investments and position them favorably for revenue growth opportunities created by the emerging wave of energy innovation.

Coordinating the “seams” in the golden age of Natural Gas

A suite of advanced upstream technologies has unleashed the potential of unconventional natural gas. Low natural gas prices and strong supply forecasts, combined with coal plant retirements and expanding penetration of variable resources like wind and solar, have accelerated the convergence of electric power and natural gas markets.

The share of natural gas in the generation mix increased from 25 percent in 2011 to 30 percent in 2012, according to the U.S. Energy Information Administration (EIA). By contrast, during the preceding decade, natural gas usage by electric power generators grew about 3.5 percent annually.

In April 2012, the EIA reported that, for the first time since it began collecting the data, generation from natural gas-fired plants was virtually equal to generation from coal-fired plants, with each fuel providing 32 percent of total generation.

The increasing interdependencies between North America’s natural gas infrastructure and the electric power grid will create new risks and opportunities at the intersection of those

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markets. The implications for the future of the utility industry are vast and an effective response is vital.

The U.S. natural gas pipeline network is a highly integrated transmission and distribution grid of producing wells; gathering lines, processors, transmission and distribution pipelines; compressor stations and storage facilities.

The natural gas grid has a history of close to 100 percent reliability, according to the Gas Technology Institute.

Natural gas and the infrastructure that carries it from wellheads to consumers provide an opportunity to enhance reliability and reduce costs by supporting the strategic deployment of high-efficiency, low-emissions generating platforms that provide power locally.

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While loss of load due to DG appears to have registered on utilities’ radar screen as a long-term risk, concerns about reliability are front and center today—and rightfully so.

A scourge of prolonged power outages over the past two years has escalated concerns about what Paula Scalingi, an expert on critical infrastructure protection, has described as an “aging, increasingly fragile [electric grid] buffeted by deregulation and market forces, stressed by relentlessly increasing demand [and] operating at near capacity with decreasing staffs.”

The costs of hardening the electric grid are daunting. One widely cited study by the Brattle Group estimated that the electric utility industry will need to invest a $1.5 trillion to $2 trillion in infrastructure upgrades by 2030.

A recent survey of utility executives and thought leaders about the future of the industry conducted by Black & Veatch revealed escalating concerns about the ability to meet cost expectations while maintaining reliability and meeting new compliance requirements.

Coordinating natural gas and distributed generation could create opportunities to enhance the reliability of the electric power grid more cost-effectively than would otherwise be possible.

In a recent study called “Pipes vs. Wires,” the Bonneville Power Administration (BPA)

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and the Northwest Gas Association (NWGA) compared the costs of building electrical transmission lines and natural gas pipelines for delivering energy to population centers.

The study concluded that: Based on a fundamental, hard-dollar comparison, natural gas pipelines are significantly less costly to build than electric wires. At the most basic level— capital cost per mile of each alternative—natural gas pipelines average between 50 and 60 percent of the cost of electric power transmission per unit of energy (or capacity) delivered.

This implies that, in many circumstances, construction of a gas pipeline would be more economical than construction of electric transmission line. But, because the physics, the associated benefits and the availability of either adjacent pipelines or electrical interconnections are so case- and site-specific, it is not possible to conclude that one system is preferable to the other without studying that specific case.

As the BPA-NWGA study emphasizes, the benefits of DG are location- and time-specific. Distributed generation can be strategically sited in areas with high levels of system congestion or peak demand and no excess capacity to achieve a wide range of specific reliability benefits in many circumstances.

As a general matter, distributed generation is far less susceptible to cascading outages or systemic collapse than the electric power grid. In 2005, the U.S. Naval Inspector General reviewed the status of the Navy’s Utilities Privatization program. The Special Focus Study, which was declassified in response to a Freedom of Information Act request in 2008,

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elec tric energy | summer 2013

recommended that the Navy discontinue its privatization program because the private sector’s utility systems were too vulnerable to disruption.

Evaluation of the vulnerabilities of our national electric utility networks reveals weaknesses that, if exploited, “… could result in a long-term, multi-state blackout. While power might be restored in parts of the regions within a matter of days or weeks, acute shortages could mandate rolling blackouts for as long as several years.’ … In addition to crippling the economy, an extended regional power outage would have catastrophic effects on the Navy’s ability to accomplish its mission.

Rather than pursue the privatization program, the Naval Inspector General recommended that the Navy consider wide-scale deployment of distributed generation technologies to protect its core mission.

“One potentially effective and protective option for improving energy security is distributed generation,” the Naval Inspector General concluded. “By distributing smaller generating capacity at multiple locations, the pitfalls of relying on a single remote source of power are greatly reduced.”

Several other studies have reached similar conclusions about the benefits of DG. For example, in 2011, a report by the Brookings Institution’s Energy Security Initiative—Assessing the Role of Distributed Power Systems in the U.S. Power Sector—found that the “increased penetration of [DG] has the potential to make a significant positive contribution to the U.S. power system and to the energy needs of the U.S. military.”

In a more technical analysis of DG’s impact on a critical telecommunications facility, researchers from the National Renewable Energy Laboratory and the Sandia National Laboratory found that compared to the conventional electric grid, installing a small gas turbine at the facility resulted in a 76-fold increase in the median time to power failure.

While strategically deployed DG could create compelling reliability and economic benefits for grid operators, would doing so ultimately reduce the role played by utilities in supplying customers with electric power? Not necessarily.

Utilities have more control over disintermediation in the electricity value stream than they may realize. Rather than pursue a wait-and-see posture, utilities should start developing “defend and extend” strategies that protect their existing infrastructure investments and allow them to take advantage of the emerging wave of energy innovation.

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for Safer and More Civil Work Environments

By Jim Walters, EdD, Owner, Power of Learning Inc .

Safe work environments often depend on how crews get along. Arguing and talking to others in an attempt to win support for one’s position is often based on how a worker is treated. I have witnessed uncivil work environments as a former electric lineman, manager and utility director. As a utility consultant, I hear about this type of situation often.

From a safety perspective, uncivil behavior is a significant distraction that ultimately can lead to accidents. In my view, leadership style of supervisory personnel is the primary contributor to civil or uncivil workplaces. To further clarify, I offer this hypothesis:

Adopting a more inclusive leadership style will engender more civil work environments and provide a positive influence on safety.

Background on Leadership StyleS Dating back to Hippocrates, physicians believed that the left side of the body was the most important half. After all, the left side is where the heart is located. In general left-brain thinking is associated with analytical thinking, whereas right-brain thinking is associated with creative thinking, as shown in Table 1—Traits of the Brain. Our society is largely developed by left-brain thinking. Power lines, bridges, the military, highways, our homes, cars, city planning, etc. all require significant analytical skills first and creative skills second. Not surprisingly, interpersonal relationships were heavily influenced by the same left-brain one-right-answer Speed approach—I am right; therefore you must be wrong.

Skill For decades society labeled leaderAttainment ship with I’ll save the day attitudes that naturally promoted behaviors focused on being number one. We learned this me-first thinking beginning in kinderThinking garten. You might recall competing with your kindergarten classmates by raising your hand as fast as possible in order to be the first to answer the Focus teacher’s question. In many cases we didn’t have the answer, but that didn’t Body matter; being first was most important.

Control As we grew up, me-first thinking was further sustained by sports figures—

without them, their teams certainly would not succeed. If that weren’t enough to engrain me-first thinking, the media further secured our thinking that leadership is a trait that only some have, such as John Wayne, Hercules, Chuck Norris, etc. (did you notice the absence of women?). This great man theory of leadership summarily dismisses followers. In fact, chances are you consider followers to be something less than leaders. If so, keep reading!

Traits of the Brain Today, one cannot be an effective leader without first understanding what it is to be a follower. To lead is to influence others in achieving an organization’s objectives; to follow is to work to support leaders by asking questions, providing resources, finding things to thank a leader for, and not criticizing leaders publicly. Both leaders and followers share traits such as honesty, dependability and competence. How can one empathize with subordinate followers if they have never paid attention to what effective followers do? What I am describing is the great collaborator style of leadership as the antithesis of the great man style of leadership.

To appreciate the power followers have, all we have to do is look at countries such as Libya and Egypt where followers,

table 1.

TRAITS OF THE BRAIN traits of the analytical left brain

traits of the analytical right brain

Slow

Quick

Efficiently associates new information via neural connections

Laborious requiring extended practice, feedback and motivation

Analytical, logical and sequential.

Converges to a single answer

Feelings, impulses and drives. Interprets emotional content

Concentrates on details

Sees the big picture

Right

Left

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table 2.

EVOLUTION OF THINKING citizens, voiced their Industrial Age Knowledge Age Conceptual Age displeasure with the aid of social media and brought down the government. In Great Great Man Some bottom-up, like fashion, employees Collaborator Top-down, lead people Bottom-up, Leadership manage people and customers are exertwith respect for lead people with like we do ing the same power on their voice. high touch. equipment. organizations. Just go to YouTube or Twitter and search for some rants Manufacturing— “Mentalfacturing”— Work holistically People work with hands work with mind with empathy about a company!

You might be asking Employees’ yourself why this shift is Employees work to lack of initiative Employees are happening. Writers such master high-touch Employee and formal willing to question aptitude to deepen as Daniel Pink, author Attitude leader’s “control” others—focus is relationships with of A Whole New Mind, optimization. orientation fuel colleagues. each other. contend that as we grow richer, as technology becomes more powerful left-braininess to one that yearns for things that are rightand as the world becomes more connected, we are nudged brained such as spirituality, emotion and creativeness. To into a new era. As with the move from the Agrarian to the Pink, the Conceptual Age is synonymous with the ability to Industrial Age, we now find ourselves in the Conceptual Age. empathize (high touch) and to detect emotional beauty and The Conceptual Age, as shown in Table 2—Evolution of behavioral patterns (high concept).

Thinking, is characteristic of a movement away from linear,

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Evolution of Thinking Daniel Goleman, author of Emotional Intelligence, further documented society’s adoption of more rightdirected thinking. Goleman examined several studies on the connection between intelligence (IQ) and career success. He found that IQ accounted for only 4–10% of career success; it was emotional intelligence (EQ) that more accurately predicted success. Emotional intelligence is associated with the brain’s limbic system that governs feelings, impulses, drive and the ability to empathize.

THE EVOLUTIONThe movement DESIGNED BRAIN from left- to rightdirected thinking has stimulated the desire for right-brained things that work to keep us calm and to find greater meaning in life.

More of us are joining churches, pausing to see the beauty in things The Reptilian Brain that heretofore would The Limbic System not have captured our The Neocortex senses, and we work harder at building relationships. Why else would candles be a multibillion-dollar business and growing when we have electric light bulbs? Why are more people volunteering to help those in need? Why are organizations clamoring for people who know how to build relationships?

Left to RighT: Implications for Leading Unfortunately, many still think of safety as a left-brain process where the proper equipment is used so as to stop an accident from happening. Safety leadership training follows this step-wise rationale by targeting the thinking brain (neo-cortex). Therefore, safety efforts continue to focus on ways to ensure that workers use the appropriate safety equipment for the job. Worse, the industry rests content knowing it has done all it can to prevent accidents… Or has it? Despite decades of effort on electric lineman safety as represented by power line construction companies and electric utilities, the electric power industry is one of the top 10 most dangerous industries, according to the Bureau of Labor Statistics (2012). What is going on? Has the industry slipped into a mindset of accident homeostasis? Is the attitude one of Well, it is dangerous work; therefore… (insert your own words). I finish the sentence with higher-level thinking skills are needed. Specifically, understanding that accidents are for the most part not caused by equipment

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table 3.

LEADERSHIP TRAINING IMBALANCED APPROACH

BALANCED APPROACH

Focus is only on leadership styles.

Focus is on both leadership styles and emotional intelligence.

Thinking To lead is to manage; therefore, engaging the appropriate style is all that is needed to lead effectively. examples There are several models, including Hersey and Blanchard’s Situation Theory—Telling, Selling, Participating, and Delegating.

Note During times of crisis—i.e., power outage—authoritarian leadership styles such as Telling are often appropriate and effective.

Thinking To lead is to influence; therefore, honing one’s ability to manage emotions is a requisite for whatever leadership style is used.

EQ Traits Self-awareness Self-control Social awareness Relationship management

malfunctions but by the imbalanced thinking of supervisory personnel and their subordinates.

In my opinion, leaders who rely primarily on great man (left-brain) leadership can increase their ability to influence by adopting great collaborator (right-brain) traits. As with all things in life, balance is crucial—and leadership is no different. Work environments and safety will be positively affected to the extent that leaders engage both hemispheres of the brain. Those charged with leading others can achieve a more balanced approach by strengthening their EQ to better manage their emotions, improve their ability to empathize with others, communicate more effectively and defuse conflict.

Application of More ‘Right-Directed’ Leadership Several organizations provide wonderful examples of the power of engaging right-brain thinking. Starbucks embarked on research on how it could teach employees to regulate their emotions and strengthen their self-discipline. The findings from the research were used in the development of an employee training program that has been credited with turning several troubled employees around. The program teaches life skills such as how to focus, how to get to work on time and how to master emotions. In researching the science of willpower, the University of Albany found that some students are able to self-discipline better than others. The researchers wanted to know what caused the difference and found that it was how

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the students were treated. Those who exhibited greater selfcontrol had a greater sense of control over their experience.

The Non-Crisis Leadership/Work Environment/Safety Connection Uncivil behavior exists in all industries and to a large extent is the result of leadership that relies on outdated practices. The days of telling people what to do as John Wayne would do as a great man have long past. Today, leading requires above-average ability to influence others in order to build cohesive teams. Addressing uncivil behavior is especially important to the power line industry given its unforgiving nature of risk. The good news is that uncivil behavior can be reduced by engaging more right-brained thinking as a counterbalance to often used practices of the left brain.

Right-brained thinking is referred to as emotional intelligence (EQ), and as research has confirmed, it is EQ and not IQ that more accurately predicts leadership success. Finally, it is my view that a more balanced leadership approach will reduce workplace incivility and create organizational climates that are safer.

To learn more about EQ, see publications such as: Primal Leadership by Daniel Goleman, Richard Boyatzis and Annie McKee; Leading Change by John Kotter; The Cost of Bad Behavior by Christine Pearson and Cristine Porath; A Whole New Mind by Daniel Pink; and Emotional Intelligence by Daniel Goleman. For now, refer to Tables 3 and 4—Leadership Training and Application of Balanced Leadership Training for concise recommendations on enriching your leadership ability and how to apply right-directed thinking in the workplace. Consider the tables as recommendations and not an exhaustive plan for becoming a more balanced leader.

Jim Walters, EdD, is a former electric lineman and current owner of Power of Learning Inc. He provides employee development services in the areas of safety, customer service, and interpersonal communication. His company focuses on the electric power industry. He graduated from Saint Mary’s University of Minnesota with a doctorate of education in leadership and received an MBA from the University of Dubuque. Reach him at jimw@poweroflearning.org or http://poweroflearning.org.

WANT MORE ON LEADERSHIP? This article sought to inform you about the link between leadership style and civility and safe work environments. Traits of the left and right brain were explained in context of leadership styles. Leadership style was related to the need for balance between intelligence (IQ) and emotional intelligence (EQ). Recommendations were provided for applying balanced leadership in the workplace— with your crews. With regard to application, how to change one’s leadership habit was not covered, but is hugely important. Do you think an article on changing habits, i.e., Changing Leadership Styles: A Matter of Habit, would be valuable? Let me know by emailing me at jimw@poweroflearning.org.

table 4.

APPLICATION OF BALANCED LEADERSHIP TRAINING SITUATION

First day on job New people, new location, new boss, new company, etc.

During workday A new day brings different circumstances and the need for continual dialogue

Rewards & Recognition As a motivator of good behavior

IMBALANCED APPROACH

BALANCED APPROACH

No recognition of the feelings of the crews. Little time is devoted to learn backgrounds, to listen to potential concerns and desires.

Significant time is devoted to providing crews voice.

Result = Pent-up feelings by subordinates serve as distraction and inattention to work results.

No time taken to continue providing subordinate voice.

Result = Self-talk gains power in controlling behavior. Boss’s silence must mean I am not accepted.

Chances are taken to prove oneself.

Paycheck is primary reward.

Cue the left brain again!

Result = Paychecks are expected; as such, they are not motivators of behavior change.

Result = Personal needs are less apt to serve as a distraction, and attention to work is strengthened.

Opportunities are sought to engage subordinates to talk about anxieties, fears, desires, and career.

Result = Helps ensure that risk is minimized by working to uncover deep-seated problems.

Intrinsic rewards such as a pat on the back and/or recognizing an employee publicly are powerful means of influence.

Result = One’s sense of belonging is strengthened, and proving oneself is less of a distraction.

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33

Renewable Energy Financing through Public Capital A Description of Qualitative and Quantitative Benefits

By Michael Mendelsohn and David Feldman, National Renewable Energy Laboratory

Introduction

34

elec tric energy | summer 2013

Figure 1 Estimated Capital Requirements for Historical and Projected PV and Wind Deployment, IN $ BILLIONS $70 $60 $50 $40 $30 $20 $10

2006 2007 2008 2009

2010

2011

2012

2020

Source: NREL

The wind and photovoltaic (PV) industries required an estimated $35 billion to finance 2012 deployments, including an estimated $23 billion1 to install 13.1 GW of wind capacity and $12 billion (SEIA and GTM 2013) to install 3.3 GW of solar PV capacity (see Figure 1).

Meeting a significant expansion of installations consistent with the U.S. Department of Energy’s (DOE) Wind Program (DOE 2012a)2 and Sunshot Initiative (DOE 2012b)3 goals (20 GW of wind, 25–30 GW of PV) will require access to broad new sources of financial capital, representing roughly twice the capital invested in 2012 overall, or 1.5–3 times the investment in wind and solar PV, respectively4.

Public capital vehicles, such as asset-backed securities (ABSs), master limited partnerships (MLPs) and various debt products represent valuable potential mechanisms by which to attract such capital and offer the opportunity to do so at low cost. This improves the affordability of renewable energy (RE) systems.

Further, if tax credits expire for wind and solar installations—as current legislation dictates—in 2014 and 2017, respectively, tax equity investors (who comprise a large source of current RE capital) will lose a significant portion of their primary investment benefit, which will magnify the need for new sources of capital.

Table 1 Cost of Capital, Market Size and Investors: Tax Equity VERSUS Public Market (United States Only)7

COST OF CAPITAL, INDICATIVE

MARKET SIZE, SECURITIES OUTSTANDING

TAX EQUITY a Unity-scale, Unlevered

7–10%

Levered

12–18%

Approximately 20 firms, mostly financial b

PUBLIC CAPITAL VEHICLES, IN $ BILLIONS Mortgage-backed Securities c

3–7%

ABS (Non-mortgages) d

3–7%

$2.15

Debt Products e

3–7%

$3.12

MLPs f

5–9%

$338

REITs g

7–12%

$579

$13.2

Financial Vehicles to Access Public Capital Many parties in the RE industry are seeking financial innovations that can greatly expand the availability and lower the cost of capital (Morris 2012; Schwabe et al.

2012). Chester et al. (2011) and other researchers have found that the RE industry5 would benefit significantly from the availability of “public market capital,” or investments that are made through financial vehicles that are procured, sold and priced on open markets, such as: n ABSs. ABSs pool assets and resell the cash flows into various risk-defined tranches. Examples include mortgage-backed securities as well as securities from pools of auto loans, credit card debt, student loans and myriad other cash flows (see Figure 2). n Debt products. Examples include governmentissued bonds, covered bonds (Covered Bond Investor 2013)6 and collateralized debt obligations, et al. n MLPs. MLPs are tax-advantaged because they are pass-through entities; thus, their income is not taxed at the corporate level. These structures are specifically available to energy and mineral extraction and transportation concerns, but are currently not open to solar and wind technologies. n Real estate investment trusts (REITs).

Pools of income producing “real property” such as shopping malls and apartment buildings. Similar to MLPs, REITs are generally not taxed at the corporate level as long as distribution criteria are met.

The cost of public capital can range (required yield) from a few basis points over U.S. Treasuries to the low double-digit range, depending on the risk of: n The pooled credit; for example, of power purchasers or those who lease equipment n The value and liquidity of any collateral; for example, car titles n The performance of the asset (if applicable) n The tranche being invested in (see Table 1) All combined, these public capital vehicles enable trillions of dollars in investment for a wide array of assets.

Because of the breadth, maturity and liquidity of these markets, they might be extended to RE asset portfolios relatively quickly and efficiently.

Certain criteria must be met for these markets to form.

Schwabe et al. (2012) found that although accessing public markets may be a viable pathway to expand the capital base, a lack of data, standardization and scale currently inhibits that opportunity. Specifically, the report showed: n The lack of historical, publicly available data addressing RE risks—including system production, customer defaults and operations and maintenance costs—is one of the greatest challenges in engaging untapped capital. n There is no homogeneity among financial transactions for renewables, which greatly increases structuring costs and the due diligence requirements for each investment8.

Securitization Fundamentals Securitization transforms illiquid financial assets (e.g., a solar lease contract) into tradable investment products. Potential investors in solar securities may include institutional

Figure 2 2011 Global Assets under Management, in $ trillionS (Hatched Excluded from Calculations)

PENSION FUNDS INSURANCE FUNDS MUTUAL FUNDS SOVEREIGN WEALTH PRIVATE EQUITY HEDGE FUNDS ETFs PRIVATE WEALTH $0 CONVENTIONAL ASSETS

$10

$20

$30

$40

UNCOVENTIONAL ASSETS

w w w. r mel .o rg

Source: THECITYUK

TABLE 1 BIBLIOGRAPHY a Smith (2013) b Mendelsohn and Harper (2012) c Board of Governors of the Federal Reserve System (2012) d Gorton and Metrick (2011) e Bonds only; not bond or loan aggregations such as collateralized debt obligations. Bank for International Settlements (2009) f National Association of Publicly Traded Partnerships (2012) g National Association of Real Estate Investment Trusts (2012)

35

investors, private wealth9 and sovereign investment funds.

These investor classes (together referred to as untapped capital sources) held about $105 trillion in global assets under management in 2011, but have traditionally not invested in U.S. RE projects (TheCityUK 2012). Of that amount, 46 percent is invested in U.S. assets.

Certain securitization mechanisms have incremental risk specialization capabilities. For example, ABSs are generally configured into different “tranches,” or segmented slices of the investment, each with a different risk level and credit rating (see Figure 3). The highest rated (lowest risk) tranche is paid first. The second-highest rated tranche is paid after the first tranche is fully paid, and so on. Investors can invest in a specific tranche based on their risk comfort and reward expectation.

As evidenced in the financial crisis of 2008–2009, these instruments can be highly volatile, and a poor evaluation of underlying asset values or cash flow certainties can lead to misperception of the investment risks. The industry will need to address quality assurance considerations for securitized RE assets to ensure long-term success.

Other financial vehicles that can tap public capital markets, such as MLPs and REITs, are not securitization vehicles per se, but accomplish a similar goal to enable ownership shares through a liquid, tradable, low cost of capital product that is priced by the market. These vehicles are not currently available to invest directly in RE asset portfolios. MLPs are open to energy extraction and transportation industries only and thus do not extend to solar and wind assets (Coons 2012)10. REITs are not technically

available to solar and wind assets, as these technologies have not been recognized as real property by the Internal Revenue Service (IRS) (Feldman et al. 2012)11.

MLPs and REITs generally have simpler structures than ABSs; the shares of a given MLP or REIT generally all have equal value (other than for managers of the portfolio). In other words, these structures do not share ABS’s ability to differentiate the riskiness of each project in their portfolio through tranches (see Figure 3). Instead, these structures represent equity ownership shares in projects held by the financial vehicle and managed by the vehicle’s managers.

Levelized Cost of Energy Impact An analysis was conducted on the LCOE impact of public capital vehicles as part of this initial capital stack against current methods of financing solar and wind assets12. ABSs were used to represent public capital inserted as debt and MLPs to represent public capital inserted as equity. Likely variations in possible financing costs were modeled to determine a range of possible LCOEs. Because the greatest cost impact is most likely to occur when the tax credits expire, wind was modeled for 2014 and solar for 2017.

The solar analysis was conducted for residential and utility-scale projects, as these segments bracket the market in terms of installed cost and cost of capital—residential projects generally carry higher yield requirements than utility scale.

All solar scenarios assume the ITC declines from 30

Figure 3 Hypothetical RESIDENTIAL SABS

Payments in default

(residential solar lease payments)

Payments in good standing

SABS = Solar AssetBacked Securities

SABS

SABS

SABS

SABS

SABS

Pools

AAA

SABS PAYMENT STRUCTURE Higher-rated bonds are the first paid each month, so they are safer.

But lower-rated bonds have a higher yield requirement.

Lower yield

First paid

Higher yield

Last paid

AA A BBB BB unrated

36

elec tric energy | summer 2013

360 COMMUNITIES IES • 4-H FOUNDATION • ABIGAIL’S ARMS COOKE COUNTY FAMILY CRISIS CENTER • ACADEMIC BOOSTER CLUB OF HCHS, INC. • ACTION FOR EASTERN MONTANA • ALBANY GENERAL HOSPITAL FOUNDATION • ALBEMARLE COMMUNITY TR R C TRUST • ALEGENT CREIGHTON HEALTH MEDICAL SERVICES FOUNDATION • ALEXANDRA HOUSE • ALS ASSOCIATION • ALZHEIMER’S ASSOCIATION • AMERICAN CANCER SOCIETY • AMERICAN CANCER SOCIETY - PENNSYLVANIA S DIVISION • AMERICAN CANCER SOCIETY RELAY FOR LIFE • AMERICAN RED CROSS - ALABAMA • AMERICAN RED CROSS CUMBERLAND VALLEY CHAPTER • ANSON ECONOMIC DEVELOPMENT CORPORATION • APPALACHIAN ALTERNATIVE AGRICULTURE TURRE OF O JACKSON COUNT TY, INC. • AREA YOUTH BENEFIT FUND • ARGIE COOPER LIBRARY • ARKANSAS SPECIAL OLYMPICS • ATLAS OF LYON COUNTY • AUDRAIN COUNTY MISSOURI UNITED WAY • BASTROP COUNTY LONG TERM COUNTY, RECOVER ERY TEAM • BAY HIGH SCHO OOL MILLION DOLLAR BAND • BEDELL FAMILY YMCA • BETTER LIVING FOR GARRISON • BIG BROTHERS BIG SISTERS OF NW MICHIGAN • BLANCHARD VALLEY CENTER • BLUE RIDGE ELECTRIC MEMBERS RECOVERY SCHOOL FOUNDATIONN • BOYS & GIRLS CLUB B OF THE BIG BEND • BOYS & GIRLS CLUBS OF MITCHELL COUNTY • BOYS AND GIRLS CLUB OF SIERRA VISTA, INC. • BOYS AND GIRLS CLUBS OF LEE COUNTY • BRAZOS VALLEY COMMUNITY ACTION AGENCY, Y, IN INC. • BIRCH GROVE FOUNDA ATION O • BUCKLIN PUBLIC LIBRARY FOUNDATION, INC. • C3 OF NORTHWEST ALABAMA • CAMP BOGGY CREEK • CAMP TOCCOA AT CURRAHEE, INC. • CANCER CARE CLUB • CANCER SUPPORT OF DEMING FOUNDATION & LUNAA CO CCOUNTY UN • CAPEE HAT HHATT TTERAS ERAAS UNITED UNITTTED ED METH M ME ETHO TTHODIST MEN • CARE TO LEARN • CASA OF CALLOWAY AND MARSHALL COUNTIES, INC. • CENTRAL & NORTHEAST MO FOOD BANK • CENTRAL GEORGIA EMC FOUNDATION • CENTRAL RURAL HATTERAS METHODIST ELECTRIC CCOOP OOPERATIVE ERA VE FO FOUNDATION O • CENTRA RRAL VALL VALLEY VA AL ELECTRIC EDUCATION FOUNDATION • CENTRAL VIRGINIA FOOD BANK • CHARLESTON COUNTY HUMAN SERVICES • CHRISTIAN SERVICES, INC. • COASTAL ELECTRIC TRUST • COOPERATIVE CENTRAL CODINGTON-CLARK O RK EL ELECTRIC CHARITABLE FUND INC. • COKER COLLEGE • COLUMBUS COUNTY AGRICULTUREL FAIR INC. • COMBINED COMMUNITY SERVICES WARSAW, IN • COMMUNITIES FOUNDATION OF OKLAHOMA • COMMUNITY ACTION C PARTNER ERSH RRSHIP OF CENTRAL RAL ILLIN NOISS • COMMUNITY COMM AND ECONOMIC DEVELOPMENT • COMMUNITY FOUNDATION FOR THE TWIN TIERS • COMMUNITY FOUNDATION OF THE GUNNISON VALLEY • COMMUNITY SHARING PANTRY INC. • PARTNERSHIP ILLINOIS CONTACTT- REFERRAL RREEFFEER CENTER FO OR HUM UM UMA MA RESOURCES • CORINTH AND AALCORN COUNTY UNITED WAY • COTTON ELECTRIC CHARITABLE FOUNDATION • COUNCIL ON SEXUAL ASSAULT AND DOMESTIC VIOLENCE, INC. • COVINGTON MAN VINGTO COUNTY FOR HUMAN CHILDREN’S C HILLD POLICY COUNCIL CO OOALITION ITIO TI • CRYSTAL COAST HOSPICE HOUSE • DABO’S ALL-IN TEAM TEA FOUNDATION • DUCHESNE COUNTY OU DEVELOPMENT CORP. • EAST CENTRAL SOUTH DAKOTA HABITAT FOR HUMANITY • EAST HHUBBARD COALITION COUNTY FIRE DISTRICT • EASTT MISSOURI MI ACTION AGENCY • EASTER SEALS UCP VIRGINIA • EDGAR COUNTY COMMUNITY FOUNDATION TION • EDGECOMBE E COUNTY RESCUE SQUAD • EL CAMPO VOLUNTEER FIRE DEPART TMENT • ENDLESS EN DEPARTMENT MOUNTAINS MEDICAL CARE FOU OUNDATION • ENERGY OUTREACH COLORADO • ENERGY SHARE OF MONTANA INC. • ENERGY SHARE OF NORTH DAKOTA AK TA CCOMMUNITY OMMU ACTION REGION VI • ERIN KIMBALL MEMORIAL FOUNDAT ATION • FALLL R RIVER I FOUNDATION FOUNDATION HELPING HANDS, INC. • FARM M RESCUE • FEDERATED RURAL ELECTRIC TRUST • FLATHEAD VALLEY COMMUNITY COLLEGE FOUNDATION • FOUND NDATION DATT ON OFF RUR RURALL HOUSING • FRIENDS OF THE ARBORETUM • FRIENDS OF THE PI PINE P N RIVER FOUNDATION PUBLIC LIBRARY • FRONTIE ER ALLIANCE CORPORATION • GEC COMMUNITY FOUNDATION • GETTING HOME, LLC • GOLDEN STRIP EMERGENCY RELIEF AGENCY • GOOD OOD SAMARITAN SAMAAR HEALTH AND WELLNESS CCENTER, INC. • GOO OOD OD SHEPHERD OD FRONTIER GOOD THRIFT STORE & FOOD BAN ANK • GRAND FOUNDATION • GRANT LEE FIRE DEPARTMENT • GREAT LAKES SHIPWRECK HISTORICAL SOCIETY • GREATER BEMIDJI, INC. 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Figure 4 Comparison of LCOE between Traditional Financing and Public Capital Financing (Residential and Utility-scale Solar)15

LCOE real ($/kWh)

$0.20 $0.16

= Benchmark

$0.12 $0.08 $0.04

RESIDENTIAL SOLAR, 2017

BIBLIOGRAPHY 1 Calculated as expected deployment multiplied by industry average price. Assumes wind is installed at $1.76/watt.

2 DOE’s Wind Program has specified a goal of 20 percent of total U.S. energy from wind sources by 2030, requiring approximately 300 GW of capacity, or an additional 18–20 GW of incremental capacity per year.

3 Representing 25–30 GW by 2020.

4 2020 financing values assume wind is installed at $1.675/ watt and solar is installed at $1.00–$1.50/watt for utilityscale to residential-scale

38

Equity Structures (e.g. MLP)

Debt Structures (e.g. ABS)

Traditional Financing

Equity Structures (e.g. MLP)

Debt Structures (e.g. ABS)

Traditional Financing

$0.00

UTILITY-SCALE SOLAR, 2017

development in 2020.

5 Primarily, this benefit is perceived for the residential, commercial and industrial markets, and less so for utilityscale development wherein each project is highly specialized.

6 Covered bonds are debt securities backed by cash flows from mortgages or public sector loans.

7 See Appendix A for discussion of pre-tax versus post-tax return.

8 The National Renewable Energy Laboratory and DOE are working to solve these problems by making data available to assess the risks in RE investment and organizing the solar industry to standardize documents and

elec tric energy | summer 2013

16

$0.07 $0.06 LCOE real ($/kWh)

percent to 10 percent in 2017. The ABS product was modeled as offering the following benefits over the traditional debt portion of the asset financing: n Lower yield (benchmark values were assumed to decline from 7.5 percent to 5.5 percent) n Longer tenure (from 12 to 20 years) n Higher debt ratio (slightly more debt on the project, from 55 percent to 57 percent, consistent with coverage ratio requirements)13 The MLP product was modeled as offering the following benefits on the equity portion of the asset financing: n Lower yield (benchmark values were assumed to decline from 11.7 percent to 6.0 percent) n Higher equity ratios (from 45 percent to 100 percent, assumes full MLP ownership of the asset).14 The solar analysis in Figure 4 indicated that savings of approximately 10 percent on benchmark cases were available to residential and utility-scale projects. Depending on

Figure 5 Comparison of LCOE between Traditional Financing and Public Capital Financing (Wind, 2014)

$0.05 $0.04 $0.03

= Benchmark

$0.02 $0.01 $0.00 Traditional Financing

Debt Structures (e.g. ABS)

Equity Structures (e.g. MLP)

the assumed starting and ending points, maximum savings greater than 30 percent may be available over time to the extent the securitization markets can increase comprehension and lowers yield requirements over successive issuance of securities.

Importantly, the modeled benchmark for traditional financing assumes highly successful projects with access to both tax equity and debt, which are difficult and timeconsuming to obtain. Currently, many projects must either forgo debt, as it is simply unavailable, and acquire funding from higher-yield equity, or not proceed due to lack of capital. The greatest benefit of successful access to capital markets may not be in reduced LCOE, but in the ability to expand the scale and increase the speed of solar deployment. These benefits were not estimated.

Figure 5 displays the wind results for the public capital analyses conducted. Wind projects benefit more directly from available equity structures, reducing LCOE by 16 percent compared to only 8 percent for solar projects. This is because solar access to MLPs might constrain the use of ITC benefits for solar projects. Both wind and solar enjoy roughly 10 percent LCOE declines due to access to ABS or other debt products.

create homogeneity among financial transactions.

9 Including private “family foundations” and direct stock ownership by households 10 In 2012, Senator Chris Coons of Delaware introduced the Master Limited Partnership Parity Act, which would, among other things, extend the definition of assets includible in MLPs to solar and wind technologies.

11 As of the publication of this paper, several companies have requested private letter rulings by the IRS to broaden the definition of real property to include solar assets.

12 As noted above, although we believe public capital has

the potential to be used as take-out financing for RE projects, particularly in years when tax incentives are in place, its impact on the price of energy will be more indirect, and thus harder to model.

13 A debt service coverage ratio of 1.45x was assumed for all solar projects.

14 MLPs would most likely use some form of debt, not to improve the cost of capital but to better manage capital raises.

15 See Appendix B for a full list of assumptions.

16 See Appendix B for a full list of assumptions.

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To learn about the most pressing electric industry concerns impacting utility operations, power generation, and power delivery, visit bv.com/reports to review and request a copy of our 2013 Strategic Directions in the U.S. Electric Industry report.

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w w w.bv.com

Best practices in

FOR IMPROVED AVAILABILITY

by Mark Siira, Director, Business Development, ComRent

Article Overview The focus of this article will be on commissioning testing of electric substations. Although not the focus of this article, the impact on critical facilities will be mentioned. This is important, as this will remain a high-growth part of the North American infrastructure growth for the next 5 to 10 years.

his article is a guide for operators of electric

The other categories of maintenance

utilities at any level. Using these practices will help to testing and corrective action will not be emphasized, but are important to improve reliability, availability, and efficiency of the primary consider in developing best and backup power supply systems at mission-critical facilities. practices for maintenance and In an attempt to improve readability, much of the technical business processes. details and references can be accessed in documents located at www.comrent.com. ¶ Testing is commonly undertaken at different levels during the commissioning of a substation, depending on the critical nature of the equipment installed and the effect of downtime on the facility owner’s business. Additionally, testing is done on a recurring basis, depending on maintenance guidelines set by company policies, specific industries or regulatory agencies. Finally, testing is often done to validate corrective actions resulting from a facility power system failure or downtime of the facility owner’s business. ¶ After many years of experience in commissioning and load testing generators, the best practice would be to obtain an experienced professional to design the test (such as a commissioning agent), integrate testing into the project plan, plan to test all of the subsystems that will affect the performance of the electric power system and use innovations in load testing that produce actionable information and confidence in the validation as it is obtained.

40

elec tric energy | summer 2013

Trends that Drive the Increasing Importance of Load Testing Although the frequency and breadth of load testing upon the commissioning of a substation or critical facility power system has increased in the last 15 years, there are several trends that are driving this to an increased level of importance. a. Changing Interconnection Standards.

Interconnection standards for connecting a local electric power system to the electric grid were developed in the late 1990s through the collaboration of electric utilities industrial facility owners, regulators and technical consultants. The passage of IEEE 1547—“IEEE Standard for Interconnecting Distributed Resources with Electric Power Systems”—leveled the playing field and gave a clear path to what was needed to increase the reliability and availability of the local power system by enabling synchronization with the grid and multiple connections from the utilities’ distribution or transmission system.

Simply put, the standard required that distributed energy resources (DER) could not affect the voltage, frequency or power quality of the electric power system (EPS) In late 2012, standards-making organizations collaborated once again on a modification of this standard, which allows voltage regulation and frequency regulation at the point of common connection (PCC). To support this, UL is developing safety standards for a “special purpose utility interactive inverter” in addition to standards included in UL1741. This is a significant change in the typical system topologies used in the past. These topologies will again increase the complexity of power systems and critical facilities, but also drive added revenue streams from the exchange of ancillary services such as power factor correction, voltage regulation and frequency regulation. b. Micro-Grids and Complex Systems.

Micro-grids are being used as a solution in areas where power quality and reliability is low, such as in remote areas and in campus settings. Although a common terminology that describes micro-grid operations still has not emerged, it is generally viewed as the viable way to increase the penetration of renewable energy in an electric power system. Additionally, the concept of a micro-grid allows for expansion and modification over time as needs change. The obvious complexity and interaction of multiple loads and sources will drive the increased importance of load testing in the actual environment.

table 1: Critical Facility Expectations year

Availability

Hours of downtime*

0.9

876

0.999

8.76

1990s

0.99999

0.0876

Current

0.99999999

0.000876

*Based on a year of 8760 hours

guide for interoperability of the electric power system with communication technology and information technology (IEEE 2030-2011). This guide mapped the communication protocols and data flows required to perform the functions on the grid and within the customer’s facility. Over time, this interoperability will result in more common approaches to monitoring and control and information exchange related to the electric power system. This may likely drive opportunities for upgrading systems to keep communications capabilities up-to-date to participate in market activities. d. Integration of Renewables and.

Electric Vehicle Infrastructure.

There has long been a desire to integrate renewable energy sources into the electric power system. Many attempts have been made to integrate through distributed energy sources located at customer facilities. However, the high cost of historical approaches has limited the adoption of this application. In light of the trends discussed above, the power industry can expect the emergence of more creative and cost-effective ways to integrate renewable energy sources into electric power. As these developments move forward, there will be retrofit and upgrade opportunities that will drive an increasing need to do more load testing.

Role of Load Bank Testing Load Testing Should Be Performed at Each Critical Point at the Substation

After individual components (controllers, connections, etc.) in the system have been verified, the best practice is to test the system as a whole by applying load where the system is designed to see it in normal operating conditions. For high voltage utility scale systems, the best practice is to apply enough load so current sensors (CT’s) can operate. This allows testing of protective relays and communications.

c. Interoperability of Software and Communication.

With the EPS, a roadmap and guideline to achieving the “smart grid” was enacted in 2009, which was valid through 2011. A collaborative effort from electric utilities, standards-making organizations and industry produced a

Why Load Bank Testing Is Becoming a Requirement in All Critical Power Systems

Businesses can no longer tolerate equipment failure as a signal that equipment maintenance is necessary. Justw w w. r mel .o rg

41

table 2: number of equipment failures* All Causes

11.6

18.1

16.3 32.8

Inadequate Maintenance 88.4% *Summary of Survey Conducted by the IEEE Industrial and Commercial Power Systems Committee.

81.9%

83.7%

Excellent

fair

poor

total

maintenance quality

maintenance quality

maintenance quality

maintenance quality

in-time (JIT) manufacturing and Six Sigma programs dictate effective preventive maintenance programs that ensure continuity of operations and prevent equipment breakdowns. Breakdowns affect quality and production schedules, but they also disrupt customers’ supply chains. JIT falls apart when suppliers cannot perform.

A primary focus of utility distribution or transmission system operators is to reduce risk for the customers by providing electric power at a high level of reliability and availability. Reliability can be defined as the probability and frequency of failures measured by mean time between failures (MTBF). Availability is defined as the percentage of time that a system is available to perform its function(s)—this variable has been the focus for all operators of critical electric power systems. For reference, Table 1 highlights a trend toward increasing availability. In the 1990s, the standard for availability was “five nines” or three minutes of downtime per year. The current expectation is “seven nines” or three seconds of downtime per year (See Table 1).

The single biggest impact on critical facility availability is utility connection via dual feeds from dual substations.

Correlation between Maintenance and Testing and Failures The reliability of electrical equipment used in utility and industrial applications has been the result of an extensive survey conducted by IEEE. Each participant in the survey was asked to give his or her opinion of the maintenance quality in the facility. A major portion of the electrical equipment covered in the survey had a maintenance quality that was classed as “excellent” or “fair.” The maintenance quality had a significant effect on the percentage of all failures blamed on “inadequate maintenance.”

As shown in Table 2, of the 1,469 failures reported from all causes, inadequate maintenance was blamed for 240, or 16.4 percent of all the failures.

Key Component Failure Rates This survey also characterized the failures by equipment type, as shown below: This information can be used to drive maintenance focus on inspection of components that most significantly affect operation. Information contained in Table 4 highlights the impact of downtime on the facilities operations. Please note that this information was obtained years ago and not the absolute performance of each component likely has improved

42

67.2%

elec tric energy | summer 2013

significantly. The intention of this data analysis is to allow operators to prioritize maintenance and inspection practices.

Best Practices Use published reference material. One takeaway from this analysis that can lead to best practices by system operators is to use published material as references in planning inspection and maintenance practices. The available material can include:

table 3: Failures by equipment type* All electrical equipment classes combined

16.4%

Circuit Breakers

20.8%

Motors

15.8%

Open Wire

30.6%

Transformers

11.1%

*Source: IEEE 493—Recommended Practice for the Design of Reliable Industrial and Commercial Power Systems.

table 4: impact of downtime* component

failure Rate (per year)

Downtime per failure (hours)

Circuit Breaker (metal clad)

0.0030

7.6

disconnect switches

0.006100

2.8

bus duct

0.01890

4.0

cables

0.00387

10.0

terminations

0.004192

11.5

transformers

0.0059

297.4

*Source: IEEE 493—Recommended Practice for the Design of Reliable Industrial and Commercial Power Systems.

z IEEE Gold Book—Design of Reliable Industrial and Commercial Power Systems z Survey data supporting that effective maintenance practices improves reliability and availability z HSB Recommended Practices for Thorough and Complete Maintenance z Utility practice of system coordination studies (IEEE 1547.7) z NFPA® 70B, Recommended Practice for Electrical Equipment Maintenance—provides specific information on how to set up a maintenance program z Scheduled maintenance tends to be more systematic and orderly, while breakdown maintenance is often performed under stressful conditions that could tempt workers to take dangerous safety shortcuts z ANSI/NETA Standard for Maintenance Testing Specifications for Electrical Power Equipment and Systems z Three Load Testing Approaches to Minimize Downtime and Increase Efficiency of Local Power Systems— A Guide for Facility Mangers (ComRent White Paper)

• • • • • • • • •

Feasibility Studies Siting & Permitting Power Plant Design Plant Upgrades & Retrofits Air Quality Control Services Transmission & Distribution Substations & Switchyards Construction Management & Inspection Services Owner’s Engineer

C E L E B R AT I N G

E N G I N E E RI N G A B ET T ER W OR LD

R

Multiple Systems in Integration Test During commissioning, it is desirable to test as many subsystems performing as part of an integrated system as possible. An analogy can be drawn to the testing that is performed in the critical facility. Data center integration testing includes performance of the utility feed, emergency backup generators, uninterruptible power supply, power distribution units, server rack-mounted load banks to generate electrical load and thermal load, computer room air conditioner test and power quality analysis and test.

www.stanleyconsultants.com 800.878.6806

Adapt to Testing Innovations As system operators consider load testing during commissioning, cost and lead time can be lowered or optimized by using innovations available today. These include medium-voltage load banks that can simplify the configuration of a test and require much less cabling as well as provide a safe environment. Additionally, advances in interactive controls, monitoring technology and advanced user interfaces can provide integration of data gathering, test operation and documentation.

Mr. Siira is currently a working group chair on a committee developing a guide to smart grid interoperability (IEEE P2030.2), UL Standards Technical Panel 1741 (inverters) and UL STP 1671 (wind turbine interconnection) and an active participant in interconnection standards development (IEEE 1547a, IEEE 1547.7). The information provided herein is a compilation of his 17 years of experience in various aspects of the electric power system industry.

Specifically, this experience covers reciprocating generators, synchronous machines, automatic transfer switches, paralleling switchgear load testing, power quality testing, power electronics and high voltage maintenance practices. w w w. r mel .o rg

43

member listings

RMEL Member Companies 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 45 46 47 48 49 50 51 52 53 54 55 56 57 58 59 60 61 62 63 64

44

ABB, Inc. ABCO Industrial Sales, Inc. ADA-ES, Inc. Alexander Publications Alstom Power Altec Industries, Inc. AMEC American Coal Council AREVA Solar Inc. Arizona Electric Power Cooperative, Inc. Arizona Electrical Apparatus Arizona Public Service Arkansas River Power Authority Asplundh Tree Expert Co. Associated Electric Cooperative, Inc. ATCO Emissions Management Austin Energy AZCO INC. Babcock & Wilcox Company Babcock Power, Inc. Basin Electric Power Cooperative Beta Engineering Black & Veatch Corp.

Black Hills Corporation Black Hills Electric Cooperative BMT Acquisition, LLC Boilermakers Local #101 Boone Electric Cooperative Border States Electric Bowman Consulting Group Brand Energy & Infrastructure Services Brooks Manufacturing Company Burns & McDonnell Butler Public Power District C.I.Agent Solutions Carbon Power & Light, Inc. Casey Industrial, Inc. CB&I CBS Arc Safe Center Electric Light & Power System CH2M HILL Chimney Rock Public Power District City of Alliance Electric Department City of Aztec Electric Department City of Cody City of Farmington City of Fountain City of Gillette City of Glenwood Springs City of Imperial City of Yuma Co-Mo Electric Cooperative CoBank Colorado Energy Management, LLC Colorado Powerline, Inc. Colorado Public Utilities Commission Colorado Rural Electric Association Colorado Springs Utilities Colorado State University Commonwealth Associates, Inc. ComRent Continental Divide Electric Cooperative Cooling Tower Depot Corporate Risk Solutions, Inc.

elec tric energy | summer 2013

65 C ounty of Los Alamos Dept. of Public Utilities 66 CPS Energy 67 Delta Montrose Electric Assn.

68 DIS-TRAN Packaged Substations, LLC 69 Dowdy Recruiting LLC 70 E & T Equipment, LLC 71 E3 Consulting 72 El Paso Electric Company 73 Electrical Consultants, Inc. 74 Emerson Process Management 75 The Empire District Electric Company 76 Empire Electric Association, Inc. 77 Encompass Energy Services LLC 78 Energy & Resource Consulting Group, LLC 79 Energy Reps 80 Equal Electric, Inc. 81 ESCÂ engineering 82 Estes Park Light & Power Dept.

83 Exponential Engineering Company 84 Finley Engineering Company, Inc. 85 Foothills Energy Services Inc. 86 Fort Collins Utilities 87 Foster Wheeler 88 Fuel Tech, Inc. 89 GE Power & Water 90 Golder Associates, Inc. 91 Grand Island Utilities 92 Grand Valley Rural Power Lines, Inc. 93 Great Southwestern Construction, Inc. 94 Gunnison County Electric Association, Inc. 95 Hamilton Associates, Inc. 96 Hamon Research - Cottrell 97 Harris Group, Inc. 98 Hartigan Power Equipment Company 99 Hawkeye Helicopter LLC 100 HDR, Inc. 101 High Energy Inc. (HEI) 102 Highline Electric Assn.

103 Hitachi Power Systems America, Ltd 104 Holy Cross Energy 105 Homer Electric Association, Inc. 106 Howard Electric Cooperative 107 Hubbell Power Systems 108 Hughes Brothers, Inc. 109 IBEW, Local Union 111 110 IMCORP 111 Independence Power & Light 112 Intercounty Electric Coop Association 113 Intermountain Rural Electric Assn.

114 ION Consulting 115 Irby 116 Irwin Industries, Inc.- Power Plant Services 117 J.L. Hermon & Associates, Inc. 118 Kahuna Ventures, LLC 119 Kansas City Board of Public Utilities 120 KD Johnson, Inc. 121 Kiewit 122 Kit Carson Electric Cooperative 123 Kleinfelder 124 Klondyke Construction LLC 125 La Junta Municipal Utilities 126 La Plata Electric Association, Inc. 127 Lake Region Electric Coop Inc. 128 Lamar Utilities Board

129 130 131 132 133 134 135 136 137 138 139 140 141 142 143 144 145 146 147 148 149 150 151 152 153 154 155 156 157 158 159 160 161 162 163 164 165 166 167 168 169 170 171 172 173 174 175 176 177 178 179 180 181 182 183 184 185 186 187 188 189 190 191 192

Laminated Wood Systems, Inc. Lauren Engineers & Constructors LEADERSHIP A Business Imperative, Inc. Lewis Associates, Inc. Lincoln Electric System Llewellyn Consulting Longmont Power and Communications The Louis Berger Group Loup River Public Power District Loveland Water & Power Luminate, LLC Magna IV Engineering Inc. Marsulex Environmental Technologies Missouri River Energy Services Mitsubishi Power Systems Americas, Inc. Morgan County Rural Electric Assn.

Mountain Parks Electric, Inc. Mountain States Utility Sales Mountain View Electric Assn.

Mycoff, Fry & Prouse LLC NAES Corp.

Navigant Navopache Electric Cooperative, Inc. Nebraska Public Power District NEI Electric Power Engineering, Inc. New Mexico State University Nol-Tec Systems, Inc. Nooter/Eriksen, Inc. Norris Public Power District North Platte Light & Power Northeast Community College Northwest Rural Public Power District Novinda Corporation NRG Reliability Solutions LLC NV Energy O I C Outage Omaha Public Power District Omnicon Technical Sales Osmose Utilities Services, Inc. Otero County Electric Cooperative PacifiCorp Panhandle Rural Electric Membership Assn.

PAR Electrical Contractors, Inc. PCS Mobile Peterson Co. Pike Electric, LLC Pine Valley Power, Inc. Pioneer Electric Cooperative, Inc. Pipefitters Local Union #208 Platte River Power Authority PNM Resources Poudre Valley Rural Electric Assn.

Power & Industrial Services Corp POWER Engineers, Inc. Power Equipment Specialists, Inc. Power Pole Inspections Power Product Services PowerQuip Corporation Precision Resource Company Provo City Power Quanta Services REC Associates Reliability Management Group (RMG) Reliable Power Consultants, Inc.

member listings

193 194 195 196 197 198 199 200 201 202 203 204 205 206 207 208 209 210 211 212 213 214 215 216 217 218 219 220 221 222

Rkneal, Inc. Sabre Tubular Structures Safety One Inc. SAIC San Isabel Electric Assn.

San Luis Valley Rural Electric Cooperative San Marcos Electric Utility San Miguel Power Assn.

Sangre De Cristo Electric Assn.

Sargent & Lundy Savage Services Corporation Scientech Sega Inc. Siemens Energy Inc. Sierra Electric Cooperative, Inc. Sierra Southwest Cooperative Services, Inc. SNC-Lavalin Constructors Inc. Solomon Associates South Central PPD Southeast Colorado Power Assn.

Southeast Community College Southern Pioneer Electric Company Southwest Energy Systems LLC Southwest Generation Southwest Transmission Cooperative, Inc. Southwestern Power Administration Southwire Company SPIDAWeb LLC Springfield Municipal Light & Power SPX Cooling Technologies

223 224 225 226 227 228 229 230 231 232 233 234 235 236 237 238 239 240 241 242 243 244 245 246 247 248 249 250 251 252

SPX Transformer Solutions, Inc. SRP St. George Energy Services Department Stanley Consultants, Inc. STEAG Energy Services LLC Storm Technologies Inc. STRUCTURAL Sturgeon Electric Co., Inc. Sulphur Springs Valley Electric Cooperative Sundt Construction Sunflower Electric Power Corporation Switchgear Solutions, Inc. T & R Electric Supply Co., Inc. Technically Speaking, Inc. TestAmerica Laboratories, Inc. Thomas & Betts Steel Structures Division Total-Western, Inc. Towill, Inc. Trachte, Inc. “Buildings & Shelters” Trans American Power Products, Inc. Transmission & Distribution Services, LLC TRC Engineers, Inc. Trees Inc Tri-State Generation and Transmission Assn.

Trimble Trinidad Municipal Light & Power U.S. Water Services UC Synergetic Ulteig Engineers, Inc. United Power, Inc.

There’s a Good Reason to Call NEC for Your Next Generator Rewind or Retrofit

Generators are our business &

Turbogenerator New or Refurbished Windings Copper or Aluminum Any Cooling Design Any Profile: C, E or other Full-Service Balance Pit Overspeed Testing Running Electrical Tests Thermal Sensivity Testing Vibration Analysis Design for Unique Issues J-Strap Failures Pole to Pole Crossovers Dovetail Cracking Fan Blade Failures

Rotor Rewinds are our specialty!

Total Number of Members: 279

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In an age where contractors are here today and gone tomorrow, we are extremely proud of our heritage and longevity. Constant refinement, innovation and investments in our business practices, safety programs and people have made us one of the region’s top specialty contractors.

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800 King Avenue Columbus, Ohio 43212 USA Contact us at (614) 488-1151 or NECService@national-electric coil.com

NEC utilizes ISO 9001:2000 certified quality management systems.

For more details, visit our website at www.National-Electric-Coil.com.

46

253 Universal Field Services Inc. 254 University of Idaho Utility Executive Course College of Business and Economics 255 UNS Energy Corporation 256 URS Energy & Construction Inc. 257 Victaulic 258 Wärtsilä North America, Inc. 259 Wazee Companies LLC 260 WESCO 261 Westar Energy 262 Western Area Power Administration 263 Western Line Constructors Chapter, Inc. NECA 264 Western Nebraska Community College 265 Western United Electric Supply 266 Westinghouse Electric Company 267 Westwood Professional Services 268 Wheat Belt Public Power District 269 Wheatland Electric Cooperative 270 Wheatland Rural Electric Assn.

271 White River Electric Assn., Inc. 272 White River Valley Electric Cooperative 273 Willbros Engineers 274 William W. Rutherford & Associates 275 Wyrulec Company 276 Xcel Energy 277 Y-W Electric Association, Inc. 278 Yampa Valley Electric Association, Inc. 279 Zachry Holdings, Inc.

elec tric energy | summer 2013

Member MYR Group

NPPD 7.25x4.75 RMEL Ad

NPPD’s Gerald Gentleman Station is Nebraska’s largest power plant, generating enough electricity to serve 600,000 Nebraskans. GGS complies with all state and federal environmental regulations and has been equipped with technologies to remove particulate matter and reduce nitrogen oxide emissions.

More than 99 percent of the water used to generate electricity at GGS is returned to the Sutherland Reservoir and its canal system, bringing agricultural, tourism and recreational dollars to the state.

GGS employs more than 200 people who live in the North Platte and Sutherland area. When combined with jobs related to the plant’s operations, $20 million in income and sales support the local economy.

nppd.com 877-275-6773

w w w. r mel .o rg

47

rmel 2013 calendar

2013 Calendar of Events January 17, 2013

March 28, 2013

July 9, 2013

Introduction to the Electric Utility Workshop Denver, CO

Electric Utility Workforce Management Roundtable Denver, CO

RMEL Golf Tournament Westminster, CO

January 29, 2013

April 4-5, 2013

Utility Financing for Non-Financial Personnel Workshop Denver, CO

Arc Flash Low Voltage and High Voltage Workshop Denver, CO

February 7-8, 2013

Safety Roundtable - August 2013 Fort Collins, CO

September 8-10, 2013 Fall Executive Leadership and Management Convention Marana, AZ

Distribution Engineers Workshop Denver, CO

Distribution Overhead and Underground Design and Staking Workshop Tempe, AZ

February 22, 2013

April 23-24, 2013

Safety Roundtable - February 2013 Denver, CO

Health and Safety Conference Denver, CO

2014 Spring Management, Engineering and Operations Conference Planning Session Denver, CO

April 24, 2013

October 3, 2013

Safety Roundtable - April 2013 Denver, CO

Distribution Automation Conference Denver, CO

March 7-8, 2013 Power Supply Planning and Projects Conference Denver, CO

March 8, 2013 Generation Vital Issues Roundtable Denver, CO

March 12-13, 2013 Transmission Planning and Operations Conference Denver, CO

May 19-21, 2013 Spring Management, Engineering and Operations Conference Vail, CO

Renewable Planning and Operations Conference Denver, CO

June 14, 2013 June 27, 2013

Distribution Vital Issues Roundtable Denver, CO

elec tric energy | summer 2013

Electric Utility Safety – Striving to Zero Conference Denver, CO

October 17, 2013

Transmission Vital Issues Roundtable Denver, CO

March 15, 2013

October 10, 2013

Plant Management Conference Golden, CO

Plant Management Roundtable Golden, CO

Distribution Overhead and Underground Operations and Maintenance Conference Denver, CO

September 26, 2013

June 13-14, 2013

March 13, 2013 March 14-15, 2013

48

April 10-12, 2013

August 30, 2013

November 15, 2013 Safety Roundtable November 2013 Westminster, CO

Transmission Operations and Maintenance Conference Denver, CO

continuing education certificates Continuing education certificates awarding Professional Development Hours are provided to attendees at all RMEL education events. Check the event brochure for details on the number of hours offered at each event.

om

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advertiser index

AMEC

Inside Front Cover

(770) 810-9698 (913) 458-2000

Black & Veatch Corp.

39

www.bv.com

Border States Electric

24

www.borderstateselectric.com

(701) 293-5834

California Turbo, Inc.

30

www.californiaturbo.com

(800) 448-1446

CoBank

37

www.cobank.com

(800) 542-8072

Colorado Powerline, Inc.

31

(303) 660-3784

DIS-TRAN Packaged Substations, LLC

47

www.distran.com

(318) 448-0274

ERG Consulting

27

www.ERGconsulting.com

(203) 843-0600

Fuel Tech

7

www.ftek.com

(630) 845-4500

26

www.gswc.us

(303) 688-5816

HDR, Inc.

15

www.hdrinc.com

(402) 399-1000

Hitachi Power Systems America, Ltd.

23

www.hitachipowersystems.us

(908) 605-2800

Hughes Brothers

22

www.hughesbros.com

(402) 643-2991

Back Cover

www.kiewit.com

(913) 928-7000

43

www.lwsinc.com

(402) 643-4708 (325) 670-9660

Great Southwestern Construction, Inc.

Kiewit Laminated Wood Systems, Inc. Lauren

5

www.laurenec.com

National Electric Coil

46

www.national-electric-coil.com

(614) 488-1151

Nebraska Public Power District

47

www.nppd.com

(402) 564-8561

OiC Group

45

www.oicoutage.com

(978) 281-1991

Pioneer Electric Cooperative, Inc.

18

www.pioneerelectric.coop

(620) 356-4111

POWER Engineers

3

www.powereng.com

(208) 788-3456

14

Sabre Tubular Structures

50

www.amec.com

www.SabreTubularStructures.com

(817) 852-1700

Siemens

Inside Back Cover

www.siemens.com

(303) 696-8446

Sega, Inc.

33

www.segainc.com

(913) 681-2881

Southeast Community College

19

www.southeast.edu

(402) 323-3401

Stanley Consultants, Inc.

43

www.stanleygroup.com

(303) 799-6806

Sturgeon Electric Co. Inc.

46

www.myrgroup.com

(303) 286-8000

T & R Electric Supply Co., Inc.

50

www.tr.com

(800) 843-7994

Trees Inc.

33

www.treesinc.com

(866) 865-9617

Ulteig Engineers, Inc.

25

www.ulteig.com

(877) 858-3449

Young & Franklin

13

www.yf.com

(315) 457-3110

Zachry Holdings, Inc.

49

www.zhi.com

(210) 588-5000

elec tric energy | summer 2013

Connecting mankind Balancing transmission grids means powering the world Plant-wide Power Transmission Integrated Automation Solutions for Glass & Solar

Various factors are transforming the power transmission business: the drive toward renewable energy, the expansion and interconnection of grid systems, and the need to gradually replace and upgrade aging grid infrastructures. Reliably balancing load and demand is becoming even more important with the increasing share of renewables in the energy mix and the growing importance of distributed generation.

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