EnergyBiz NovDec2011

FINANCING RENEWABLES

VOLUME 8 // ISSUE 6 NOVEMBER 11 // DECEMBER 11 energybizmag.com

PEOPLE // ISSUES // STRATEGY // TECHNOLOGY

AMERICA’S NUCLEAR EFFORT ANTHONY EARLEY

ENGINEERING PG&E’S TURNAROUND FROM SOAP TO ENERGY ºº

PROCTER & GAMBLE CEO ON GETTING CONSUMER FRIENDLY

TWO REGULATORS DEBATE RENEWABLE STANDARDS AN E N E RGY C E NTR AL PU B LIC ATION

THE FUTURE OF FOSSIL FUEL GENERATION

DAAMI THE CONVERGENCE OF DA AND AMI Through the convergence of DA and AMI with Elster’s EnergyAxis Smart Grid platform, utilities can obtain the benefits of Voltage Conservation across the Smart Grid distribution system.

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NOVEMBER/DECEMBER 2011

42

18

22

34

Features

Departments

22 The Embattled Regulators

4

30 The State of

America’s Nuclear Effort 33 Addressing Nuclear Challenges

O U R TA K E

Electric Vehicles

and the Future of Utilities

6 Letters E N E R GY B I Z 3 6 0

8 Access to Smart Grid Resources/ Mapping It BUSINESS EDGE

34 Financing Renewables Going Forward

10 Closing Indian Point 12 The Rising Role of Electricity 14 India’s Explosive Energy Growth 16 Frisco Utility Needs a Reboot INTRODUCING

36 The Future of Fossil Fuel Generation

36 Research Required 38 The Case for Coal

18 Engineering a Turnaround – PG&E’s Anthony Earley T E C H N O LO GY F R O N T I E R

52 Solar Paint 53 Facts Trump Rhetoric 54 Making a Business from Smart Meter Data

42 The State of Renewables Standards 44 POINT Policies Spur Growth 46 POINT Quotas Don’t Make Sense 47 The Information Challenges of Renewables 49 Profiting from Solar

[ ] COUNTER

Vol. 8, No. 6. Copyright 2011 by Energy Central. All rights reserved. Permission to reprint or quote excerpts granted by written request only. EnergyBiz (ISSN 1554-0073 ) is published bimonthly by Energy Central, 2821 S. Parker Road, Suite 1105, Aurora, CO 80014. Periodical postage paid at Aurora, Colo., and additional mailing offices. Subscriptions are available by request. POSTMASTER: Send address changes to EnergyBiz, 2821 S. Parker Road, Suite 1105, Aurora, CO 80014. Customer service: (303) 782-5510. For change of address include old address as well as new address with both ZIP codes. Allow four to six weeks for change of address to become effective. Please include current mailing label when writing about your subscription.

2 E N E RGYB I Z November/December 2011

METRICS

55 Telecom Spending Climbs/ Ongoing Energy Slump LEGAL ARENA

56 Energy Gridlock in Congress 57 New Jersey Forges an Energy Policy 59 Smart Grid Backlash F I N A L TA K E

62 From Soap to Energy

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» OUR TAKE Electric Vehicles and the Future of Utilities THE KEY TO UNLOCKING AN ENERGY REVOLUTION I READ BILL GATES’ OBSERVATION about batteries in a book review of Daniel Yergin’s new opus, The Quest.

Gates has pointed out that all the batteries in the world can store no more than 10 minutes of the world’s energy needs. Increase that capacity exponentially and renewables will become pervasive — and a source of baseload generation. In addition, improved energy storage capabilities would transform transportation and sharply reduce our dependence on fossil fuels.

A breakthrough in battery technology would also advance the smart grid revolution.

The startup company Better Place is ready to start widely deploying electric vehicles across Israel. The first electric vehicles, made by Renault in Turkey, are expected to be delivered starting the end of this year. Customers in Israel buy 200,000 new vehicles a year. Already, 100,000 have signaled their interest in the EVs. Better Place and PJM recently studied the impact 1 million EVs would have in the Washington-Baltimore area. Plugging them in on a random basis would require $750 million worth of wholesale power a year. However, “smart charging” the cars through a centrally controlled network would halve the increase in wholesale energy costs, according to the study.

Call it a smart grid app.

Michael Granoff, a Better Place senior executive, said the network operating center will monitor the status of every auto battery in its system and power supply and prices on the grid. The goal will be to maximize the efficiency of powering up the electric vehicles’ batteries across the nation at the least cost and strain to the electric grid.

4 E N E RGYB I Z November/December 2011

In a report, Israeli Electric, the national utility, said, “In this scenario, an optimal battery-charging plan exists for each car that takes into account the state of the battery, the expected journey length until the next charging spot, and the state of the local and national electrical system.”

What about looking at the For industry insights — EV batteries as a distributed and my blog — visit energy storage network? www.energybiz.com.

Granoff said that Better Place is working to get its system deployed in Denmark, which relies heavily on wind generation.

The first major efforts to orchestrate renewable energy storage in auto batteries are likely to be in Denmark, Granoff said.

Entrepreneurs are already making the connection among electric vehicles, batteries and renewable energy.

Granoff said pulling it all together will be “the area of greatest innovation and disruption in the next five years.” Electrifying transportation, he said, is primed for growth. “Job creation will be where the cars show up.”

The U.S. Department of Energy is already supporting important research to spur development of high-density, low-cost batteries for electric vehicles to cut oil imports and greenhouse gas emissions while spurring economic growth.

At the same time, there is a good deal of justifiable skepticism about how rapidly American consumers will embrace electric vehicles.

Utilities are now mired in a prolonged spell of flat energy sales. Some are already beginning to explore the role that electric vehicles may play to speed the modernization of their infrastructure and deployment of the smart grid. The goal will be to develop a new generation of energy services, sales and profits.

Martin Rosenberg, Editor-in-Chief editor@energybiz.com

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» LETTERS To contribute to the Letters column, please e-mail your submission to editor@energybiz.com.

Provide your name, address and daytime phone number.

Letters may be edited for style and space.

Prepaid energy offerings are the first consumer-facing application of the smart grid with significant market potential.

Prepaid energy also serves as the wedge for rulemaking around a number of regulatory issues, especially those focused on low income and consumer protections.

ongoing coverage of the smart grid. The grid must integrate network design, architecture and management at its core from day one. Unfortunately, first-generation smart grids usually start with one application such as smart metering and then expand incrementally by adding more applications over time. Each has a standalone communications network.

In fact, the grid is not fully smart until it is integrated. So, we need to quickly evolve to an advanced smart grid, an issue I explore in my new book, The Advanced Smart Grid.

Advanced smart grids start with a companywide or systemwide smart grid architecture.

How can a balance be struck between allowing consumers to exercise their preferences and The communications network, ensuring that adequate consumer or network of networks must be protections are in place? How designed to support the journey can regulatory rules as new services and practices be and capabilities revised to allow for are required. innovation and new Andres Carvallo offerings, yet maintain Proximetry The the original regulatory San Diego Transmission protections?

Revolution people // issues // strategy // technology ExclusivE

EPA’s LisA JAckson on thE front LinEs º

º what is DriVing it º who is leaDing it

º how will it affect you

Grid Gurus

fErc chAirmEn wEiGh in

An E n E rgy C E ntr Al Pu b liC Ation

A free report on these issues is available at www.defgllc.com.

Jamie Wimberly DEFG EcoAlign Washington

I write in response to your cover story “The Transmission Revolution” [September/October] and 6 E N E RGYB I Z November/December 2011

mrosenberg@energycentral.com 913.385.9909 CHIEF COPY EDITORS Meaghan Alfier,

Don Bishop, Martha Collins SENIOR CONTRIBUTORS

Bill Opalka, Editor-in-Chief, RenewablesBiz Daily bopalka@energycentral.com 860.633.0090 FEATURE WRITERS Steve Barlas,

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www.energycentral.com PRESIDENT/CEO Steve Drazga

Volume 8 // issue 5 september 11 // october 11 energybizmag.com

Grid School for reGulatorS

The conclusion reached by all in a Working Group my firm manages is that the regulatory rulebook will need to be updated and revised to reflect new products and services, such as prepaid energy, that will be enabled by smart grid.

www.energybizmag.com EDITOR-IN-CHIEF Martin Rosenberg

her Views on the future of coal

leaDing in DisruptiVe times

If we want a more sustainable environment, then we need more engineers. º

learn the top of minD concerns of iou anD public power execs

My company recently opened its call for applicants for a new scholarship program. It is open to all high school seniors in the Houston Independent School District, and challenges them to offer ideas for making industrial facilities more energy efficient.

More information is available at: www.facebook.com/honeywellstudentengineers.

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energy/utilities /engineering 20 0 5 , 20 0 6 , 20 07, 20 08 , 2010

P E O P L E

P R O C E S S E S

T E C H N O L O G Y

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» ENERGYBIZ 360 Mapping It L A RGE COL L ECT ION OF RENEWA BL ES DATA

Access to Smart Grid Resources EPRI W EB TOOL

The Electric Power Research Institute is coordinating one of the most comprehensive smart grid demonstration programs in the world.

Utilities from France, Ireland, Canada and the United States are taking part in the seven-year collaborative research initiative demonstrat­ing the integration of distributed energy resources in large-scale projects.

In April, EPRI released a broad assessment of the costs and benefits to modernize the U.S. electricity system and fully deploy a smart grid.

The smart grid cost and benefits report can be easily located by entering its product ID number, 1022519, in the www.epri.com search field.

When the smart grid demonstration project was started in 2008, the EPRI team created a dedicated resource area within the Web site to provide a public resource center of materials associated with the demonstrations. A newsletter chronicles each demonstration project and provides related news and information. These newsletters are available in the Smart Grid Resource Center, at www.smartgrid.epri.com.

Don Kintner // Electric Power Research Institute

8 E N E RGYB I Z November/December 2011

The U.S. Department of Energy’s National Renewable Energy Laboratory has an abundance of high-quality renewable energy resource data and maps for the United States available on its Web site at www.nrel.gov/renewable_resources.

Renewable resources can vary considerably from one area to another, but nearly every area of the country can take advantage of some kind of renewable energy technology. Knowing the resources of a region, state or even a neighborhood is critical to renewable energy planning and choosing a site.

NREL’s online RReDC or Renewable Resource Data Center is the world’s largest free collection of renewable energy resource data, with comprehensive information on solar, wind and biomass. Additional datasets for various technologies are available for use in geographic information system applications, which allow researchers to identify relationships between features, and can be queried or manipulated based on tabular and spatial characteristics.

The capabilities of GISs are greatly enhanced by NREL’s team of experts, who can perform the manipulation and analysis to link topographic, demographic, utility, facility, resource, environmental, land use and other data, including energy planning and forecasting, policy formulation and project development assistance. For example, to determine whether a particular type of solar technology can be developed, GIS analysts can match a region’s solar resource characteristics with electrical transmission access and available flat land suitable for large solar arrays.

NREL also uses GISs to create dynamic maps and Web applications at maps.nrel.gov to visualize renewable energy resources, explore factors affecting development of the technology, and conduct analysis online to aid in understanding what renewable energy technologies are viable solutions.

However, if you are not into data mining, NREL’s staff has combined the most popular U.S. Renewable Energy Technology Resource Maps into a handy PowerPoint that can be easily downloaded from www.nrel.gov/gis.

Heather Lammers // U.S. National Renewable Energy Laboratory

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» BUSINESS EDGE

Photo courtesy of Entergy

Closing Indian Point WHAT WOULD REPLACE THE NUCLEAR PLANT? // BY GARY M. STERN OVER THE LAST 20 YEARS, critics have clamored for the closing of Entergy’s Indian Point nuclear plant, located in Buchanan, N.Y., only 26 miles from densely populated New York City. Indian Point has been deemed a potential disaster site whose safety could be disrupted by an earthquake, hurricane or terrorist attack. When an earthquake rocked Japan’s Fukushima nuclear plant this year, emitting dangerous radiation, the demands that Indian Point close when its license expires reached a crescendo.

10 E N E RGYB I Z November/December 2011

Hearing those cries, Gov. Andrew Cuomo has called for the closing of Indian Point when its license expires — the first nuclear plant in 2013 and the second in 2015. But Indian Point produces over 2,000 megawatts of power, supplying 25 percent of the load for the New York City metropolitan area, and no one has definitively determined what would replace its power generation.

Ashok Gupta, the New York-based director of energy policy at the Natural Resources Defense

Council, said closing Indian Point would minimize the chance of a potential disaster. “If there were a catastrophic accident, similar to Fukushima, the implications of the cost and health to the region would be unimaginable,” he said.

Replacing the power will require a combination of sources. Gupta would like to see the repowering of natural gas plants within the city and deriving 10 percent of power from hydropower from Quebec, upstate and offshore wind, and solar.

But that won’t replace the 2,000 megawatts, so building a natural gas plant supplying 500 megawatts of power in the Hudson Valley in proximity to Indian Point will also be needed.

If all of these changes are made, Indian Point can be replaced. “Lights aren’t going to go out and reliability won’t be affected,” Gupta said.

“We have three to five years to plan.” He said the key question to answer is what mix of power will most benefit the area.

Of course, the ratepayers end up paying for new plants and repowering older ones. Initial analysis predicts electric prices would rise 5 to 10 percent to replace Indian Point’s power. Hence, the average consumer might pay $106 instead of $100 on a monthly electric bill. Gupta suggested that this is a small price to pay for minimizing the chances of a major nuclear disaster.

Hired by the New York City Department of Environmental Protection to analyze the effects of Indian Point’s closing, Chris Russo, a principal at Charles River Associates, noted that three new projects, Astoria Energy, Bayonne Energy Center and Hudson Transmission Partners, would have to be completed. He said Astoria, a gas-fired combined cycle, is already operational and Bayonne, a gas-fired unit, and Hudson Transmission, a cable project, are under construction and slated to go live before 2015.

But Russo added, “You’d need more than those three to maintain system reliability.” Like Gupta, he said constructing natural gas plants in New York City or the lower Hudson Valley must be added to the portfolio.

Furthermore, Russo said, “Any solution will take a willingness to accept higher prices and higher

Any solution will take a willingness to accept higher prices and higher emissions.

emissions. Take away 2,000 megawatts and build 1,500 megawatts and prices go up. It’s simple supply and demand,” he said.

Stephen G. Whitley, CEO of the New York Independent System Operator, which is responsible for overseeing the New York power grid, reported to the state legislature about the consequences of closing Indian Point. Whitley said that replacing the power is necessary to avoid blackouts. Since the Hudson Valley can’t supply sufficient transmission, additional generation and demand GOOGLE SOLAR response would be needed.

Google plans to Many of New York’s power provide $75 million to deploy 3,000 plants are aging and must home solar systems be upgraded to improve nationwide, according to the Associated Press. transmission in order to fill Google will own the the void left by Indian Point. panels and be paid for the power they generate.

But not everyone thinks The goal is to speed that replacing lost power deployment of expensive solar equipment. Google within four years will be easily would reap federal and accomplished. Joseph Oates, state subsidies. vice president of Energy Management at Con Edison, said even with the three new generating projects getting off the ground, “this region will be 1,000 megawatts short. It can take a long time to develop a large project or series of smaller projects.” Without that power, when the temperature hits 104 degrees as it did on July 22, there will be rolling blackouts in the city.

To avoid power shutdowns, Oates said, “Projects need to start going soon to make sure they can go live by 2016. It takes a minimum of five years to get all the phases — engineering, permitting, authorization — into place and long-term contracts must be signed.”

If not, air conditioners may not work the next time the temperature hits 100 degrees.

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For more information about these and other events, please visit www.energycentral.com/events.

energybiz.com E N E RGYB I Z 11

» BUSINESS EDGE The Rising Role of Electricity THE PURSUIT OF EFFICIENCY // BY SUSAN STORY ELECTRICITY IS THE HEART of the U.S. energy economy. And the numbers say so.

A report by the Manhattan Institute cites this fascinating statistic: In 1950, 20 percent of the U.S. gross domestic product was directly dependent on electricity. By 2008, that number had tripled to 60 percent. Additionally, the report states that over 85 percent of the U.S. energy growth since 1980 was met by electricity.

While the fabric of our energy landscape finds itself dependent on electricity rather than oil, this is favorable for energy supplied by domestic resources and supports growing energy independence and security.

As one of the largest producers of electricity in the country, Southern Company knows well the ever-increasing need for energy. And that demand continues to grow as new energy-efficient, cost-effective ways to electrify the United States are discovered.

In the Southeast, which we serve, there are several examples. One is the Georgia Port Authority in Savannah, the fourth-largest container port in the United States. A few years ago, the port converted some of its diesel equipment — ship-to-shore cranes and refrigerated cargo racks — to electric equipment. In 2009, port officials reported that this move reduced their diesel usage by more than 4 million gallons a year.

The lower operating costs and emissions prompted the port to electrify even more of its equipment.

The Alabama State Port Authority electrified a major dredging project in Mobile, Ala., and reported a large fuel and emissions savings as well. The Electric Power Research Institute estimates that more than 28 tons of emissions of pollutants per day were avoided by using electric equipment, rather than diesel equipment, for this project.

Another example: Hartsfield-Jackson Atlanta International Airport and Delta Air Lines are so satisfied 12 E N E RGYB I Z November/December 2011

with the results of converting equipment from diesel to electric that a charging infrastructure to support electric equipment is being integrated into Hartsfield’s new international terminal.

These are just a few initiatives where substituting electro-technologies for other energy resources is great for consumers. It’s great for America as well.

The United States spends $1 billion a day on foreign oil, while our electricity is made right here in America.

As plug-in electric vehicles become increasingly available, we expect to see even more demand for electricity. The primary factor driving today’s consumers to this latest electro-technology is cost.

Both gasoline and diesel prices outweigh those of electricity. Based on gasoline prices in the Southeast and our average Southern Company retail rates, it’s estimated that electric vehicle owners in the Southeast will save about 60 percent of what they currently spend on gasoline.

In today’s world, energy efficiency must be a part of any energy discussion. We all agree that promoting the efficient and clean use of energy will benefit Americans, our environment, our economy and our national security.

MERGER JOB LOSS At Southern Company, we’re all about Duke Energy’s merger helping our customers use energy more with Progress Energy will result in the efficiently. That doesn’t mean they neceselimination of 2,000 sarily will use less electricity, which is how jobs, according to a report in the Charlotte some define energy efficiency. It means Observer. that we’re actively promoting ways to help The new figures of them use every kilowatt-hour of electricity job losses double previous estimates. more wisely, taking advantage of better The companies operate insulation, energy-efficient appliances and in six states. end-use technologies, for example.

As consumers continue to save money and overall energy by using electro-technologies rather than technologies powered by other energy resources, and as our environment and national security benefit as well, the electrification of the United States will continue to be the lifeblood of the economy.

Susan Story is president and chief executive officer of Southern Company Services.

» BUSINESS EDGE

India’s Explosive Energy Growth AN INTERVIEW WITH P. UMA SHANKAR // BY MARTIN ROSENBERG INDIA IS POISED for epic expansion of its electric system as it races to power a fastgrowing economy and rising expectations of improved living conditions. In the process, it has the benefit of being at the forefront of deployment of just-developed technologies that will give it one of the most advanced grids in the world. To better understand the magnitude of the challenge and its implications, EnergyBiz recently sat down with P. Uma Shankar, secretary in India’s Ministry of Power, at the GridWeek conference in Washington. He is the third-highest official in India’s equivalent of the U.S. Department of Energy. Our conversation, edited for style and length, follows.

What is the full scope of India’s energy needs?

ENERGYBIZ

If you look at the growth in energy demand, it is about 6 percent a year. We have a very large share of homes that are not connected to electricity.

It was about 50 percent in 2005. It comes to about 70 million homes.

SHANKAR

We need to connect these homes to the grid to give them electricity. Part of that work has been done.

One can look at about probably 40 million That have been provided access to the grid. We still have a long way to go. The per capital annual consumption in the country is quite low — about 700 kilowatt-hours. Our goal will be, first, to get all the people on the grid and then increase people’s consumption to at least about 1,000 kilowatt-hours.

How long will it take get all Indians on the grid?

ENERGYBIZ

It will take five years to get everybody connected. In about two to three years, the per capita consumption will cross 1,000 kilowatt-hours.

It would require the electricity supply to grow about 8.7 percent a year. We have been growing by about SHANKAR

14 E N E RGYB I Z November/December 2011

5.5 percent a year. By the end of this year, we will have about 200,000 megawatts of generation.

This we will need to increase by about 15,000 to 20,000 megawatts per year for the next 10 years.

ENERGYBIZ

What share will come from nuclear

power?

SHANKAR The nuclear establishment is probably looking at 20,000 megawatts by 2020.

ENERGYBIZ

Are those projects under development

already?

Yes. They are already under construction.

They all take quite some time. We currently have about 5,000 megawatts of nuclear generation. The mainstay of our generation is coal.

SHANKAR

ENERGYBIZ

What about renewables?

SHANKAR We got into a blending mechanism which blends the cost of conventional and solar power. We are looking at 1,000 megawatts of solar going into this mechanism. Once this gets off the ground, then the demand for solar panels will go up and the prices of panels will come down. Our goal for solar power is about 20,000 megawatts by 2020.

ENERGYBIZ What role will smart grid play in India’s development of its electricity infrastructure?

SHANKAR The capacity to generate will increase. The grid will become bigger and bigger. It would be difficult to manually handle the grid. That is where you need automation and you need automatic controls to see that the grid is managed properly. You need to have the information that is almost instantaneous so that you have an idea as to the state of the grid. We would definitely have to smarten up the transmission system.

ENERGYBIZ Where will you get the money to pay for this? Is the government subsidizing it?

Photo courtesy of GridWeek.

There is no need to subsidize this. The investment becomes part of the charge that is passed onto the consumer.

SHANKAR

ENERGYBIZ

How is the transmission sector

organized?

SHANKAR The transmission business is almost entirely in the hands of government. India has 28 states that have their own transmission utilities that manage the transmission system within the state.

When it comes to electric infrastructure development, how does India compare with China?

ENERGYBIZ

I think the yearly growth of Chinese generation capacity is far, far ahead.

SHANKAR

Do you think there are things that you can learn from what China has been able to do?

ENERGYBIZ

In terms of managing construction, yes.

First, we were building 2,000 to 3,000 megawatts per year, and then we moved on to about 5,000 and now we are doing more than 10,000 megawatts. In the coming years, we will be able to do 15,000 to 20,000 a year.

SHANKAR

ENERGYBIZ When you talk about 50 percent of India not being connected to the grid and average per capita consumption is well below world levels, it sounds like this is a huge revolution in India.

Right. Now more and more people are getting connected to the grid. As soon as we electrify a home, the first things that come in are a fan, lights and then television. It brings in a lot of other things such as safety. It extends working hours. It helps children to read. Television brings in a lot of information about the world and health. You also can have water systems in the village that provide drinking water for people. So it means some very big changes.

How does it happen? From the substation, we extend the lines down to the village and then we provide connections to the households.

SHANKAR

ENERGYBIZ

What will India look like in 15 years?

Per capita electricity consumption will increase to 2,000 kilowatt-hours per person.

SHANKAR

And will you become one of the leading economic powers anytime soon because of this?

ENERGYBIZ

I think so. It will be a boost. In about 15 years we definitely will not have shortages.

SHANKAR

energybiz.com  E N E RGYB I Z 15

» BUSINESS EDGE Frisco Utility Needs a Reboot REBUILDING THE BRAND // BY AL SENIA TO GET ITS MOJO BACK in its home state of California, Pacific Gas and Electric executives, led by new Chief Executive Anthony F. Earley Jr., will need to develop a new long-term strategy for the utility, communicate it effectively both internally and externally and deliver a consistent message. The company needs to become a lot less tone deaf in its dealings with state businesses, consumers and politicians, according to a number of energy industry observers.

“During the last few years at PG&E, there has been a massive shift related to leadership,” said California State Assemblyman Jerry Hill, a Democrat who has criticized the utility. “It’s a massive bureaucracy. They need to streamline and be able to react quickly on issues. And they need to be honest. That’s what I want to see in the future.”

Hill said PG&E has lost political stature in the state because it has acted hypocritically and often foolishly.

“What I saw in the last year was PG&E saying one thing — ‘Safety is our primary goal’ — while the fact is, they are not putting their money where their mouth is.”

Hill added that the utility has lobbied against enhancing safety and liability standards in the legislature and before the Public Utilities Commission because it fears there would be a detrimental impact on the company’s rate of return.

The utility’s growing number of critics fault it for not being candid or responding effectively throughout the recent crises that have enveloped it. The most serious was a PG&E pipeline explosion last CITI SOLAR year in San Bruno, Calif., that CITI and other lenders destroyed a residential neighplan to close a $1.8 billion federal borhood and killed eight people. loan guarantee to back The utility denied any wrongdoloans to First Solar to build a 550-megawatt ing, but a yearlong investigation solar farm in California, by the National Transportation according to Dow Jones.

Safety Board blamed the exploFirst Solar said it will hire about 500 workers to sion on the company, concludbuild the solar farm. ing in September that PG&E engaged in poor safety practices, lax recordkeeping, inadequate inspections and botched repairs. After the findings, PG&E issued a statement pledging to incorporate the NTSB’s recommendations into its future safety plans. That, however, has hardly placated critics.

16 E N E RGYB I Z November/December 2011

“They have a long way to go,” said Jim Ruane, the mayor of San Bruno. “The NTSB cited a number of organizational deficiencies. I feel for the most part, this could have been prevented. They need to be held to a gold standard going forward.”

The San Bruno tragedy surely was the most serious crisis PG&E faced, but critics contend it has made a number of blatant missteps during the past few years. PG&E was roundly denounced in 2010 for spending $46 million on an ill-fated state ballot proposition that would have limited the ability of local governments to enter the energy business. Some 53 percent of California voters voted it down, but 68 percent rejected it in PG&E’s own service area, an indication of the disdain many PG&E customers hold for the utility. Even its efforts to install smart meters in its Northern California service area have triggered much more strident opposition from worried residents than in areas served by the state’s other investor-owned utilities.

“I really feel that PG&E has been very arrogant in its approach,” said Mark Toney, executive director of The Utility Reform Network, a statewide, nonprofit consumer advocacy organization that often has locked horns with the giant utility. “A little bit of humility would have gone a long way with some of the things they have done.”

Toney added that the utility “burned a lot of bridges” on its proposition effort and even failed to gain political support from the state’s other two giant investor-owned utilities, Southern California Edison and San Diego Gas & Electric. Toney believes PG&E “has a serious problem being able to communicate in an authentic way, in a way people can trust. My personal feeling is that PG&E has a serious lack of organizational discipline. It’s just a poorly run utility.”

Even its harshest critics, however, concede that PG&E has a long history, an experienced workforce and a strong brand in the northern part of the state.

The real challenge for Earley, the new chief executive, will be to capitalize on these assets and leverage them so that the utility can move past its current series of travails.

They need to be held to a gold standard moving forward.

» INTRODUCING

Engineering a Turnaround MOTOR CITY UTILITY EXEC WELCOMES ASSIGNMENT // BY MARTIN ROSENBERG For some time now, a thick fog has rolled over San Francisco-based Pacific Gas & Electric, one of the nation’s largest utilities. Its smart meters have been criticized as inaccurate, a threat to health and an invasion of privacy. Its leading and losing role pushing a statewide ballot measure seen as anti-public power rankled many. A devastating explosion on a PG&E pipeline a year ago killed eight and destroyed 38 homes in San Bruno, Calif., leading to regulatory and criminal probes.

Embattled former telecom executive Peter Darbee resigned in April as PG&E chairman, chief executive and president. Anthony Earley, former executive chairman of DTE Energy, has succeeded him. Earley, 62, holds graduate degrees in engineering and law and was an officer in the U.S. Navy nuclear submarine program. He is the first PG&E leader tapped from outside the utility since it was founded more than a century ago. In announcing his appointment, the company was clear about his mission: win back public confidence. The company serves 5.1 million electric and 4.3 million natural gas customer accounts.

Earley talked to EnergyBiz in September in his second week on the job. We discussed the state of the company as well as his long-term vision for PG&E. His comments, edited for style and length, follow.

18 E N E RGYB I Z November/December 2011

How do you view the challenges before you?

ENERGYBIZ

I’m really thrilled to be with PG&E. You know this company has been an icon in the business for years. Throughout my career, you could have asked me or anyone else in the industry, “What are the three companies that you would really like to be with?”

PG&E was on everyone’s list. It is kind of fun to cap my career coming here to PG&E. EARLEY

You have a bit of a combat role to fill at an embattled utility.

ENERGYBIZ

We have a number of challenges. Winning back public confidence is one of them. Achieving our goal of being one of the premier suppliers of electric and gas service is another challenge. The lesson learned from San Bruno, a tragic accident, is that there’s work that we need to do on our systems, processes and procedures to get to the level of operational excellence that this company ought to be at.

EARLEY

ENERGYBIZ PG&E recently had a big political battle in California with public power. Is there an olive branch that you want to extend?

Well, throughout my career I’ve always worked well with co-ops and municipal power utilities.

We have more things in common than things that we don’t have in common. One of my efforts here will be to reach out to them and try to figure out how we can work together on important issues.

EARLEY

ENERGYBIZ How do you win back consumer confidence?

Photo courtesy of PG&E.

We need to always understand what it is they want and need and then make sure our systems are designed not for our convenience but for our customers’ convenience. When I look at our track record here at responding to requests for new services — it takes a long time to do that. A customer building a new warehouse or a new factory wants service installed tomorrow. We need to make sure we are providing what customers need.

How would you like to reshape PG&E’s corporate culture?

Do you think you need to refocus how you are promoting the smart grid to your customer base?

Can you think of any achievements at DTE that you’d like to replicate at PG&E?

EARLEY

ENERGYBIZ

The reality is that the smart grid is going to help us provide really great service. I don’t think we’ve explained that well enough as an industry.

EARLEY

Some reports say 150,000 customers want to opt out of smart meters.

ENERGYBIZ

Well, it’s a large number but a very small percentage. Part of it involves education. One issue that is raised is electromagnetic fields. The EMF from a smart meter is miniscule compared to things that people are comfortable with in everyday life, like cell phones and other home electronic equipment. There always will be some people who don’t like change.

EARLEY

ENERGYBIZ

I want to see a corporate culture that is very open and honest. We need to do some industry benchmarking. Rather than trying to explain away the gaps between our performance and the best in the industry, we need to really celebrate those gaps. They provide us with a roadmap of how we can improve and provide outstanding service.

EARLEY

ENERGYBIZ

I did establish an extensive benchmarking process there. When we first started benchmarking five or six years ago, and when we really looked at ourselves objectively, we were solidly mediocre. By the time I left, most, not all, but most of our performance indicators had significantly improved. One area that I really worked hard on at DTE to improve was our safety performance with employees and the public.

EARLEY

If DTE at one point was solidly mediocre, how would you rate PG&E today?

ENERGYBIZ

Probably a similar description. Some things the company does well. But there are a lot of other things we need to do a lot better.

EARLEY

energybiz.com E N E RGYB I Z 19

» INTRODUCING ENERGYBIZ

What about leadership on renewables?

From a distance, when I read that our target is to have 33 percent of generation from renewables by 2020, my first reaction was, “Boy, how do you get there?” We’re on track and we’ve got a plan in place to achieve those goals.

EARLEY

You are now the leader of 20,000 employees. What can they expect differently from the way you run the company?

ENERGYBIZ

EARLEY They can expect me to be focusing on how they are performing day to day. I’m very interested in their operations. I’ve already been out in the field talking to people and I’ve been meeting with our unions.

They want to know that somebody cares about what they are doing every day because it is hard work.

Like most utilities, is PG&E facing a wave of retirements?

ENERGYBIZ

There are opportunities to move people around and retrain people. We need to run the numbers to find out where we’ve got problems.

The issue at this company is linemen. We restarted some of our linemen training programs and bringing on new apprentice classes.

EARLEY

What kind of capital expenditure initiatives are you looking at in the next few years, and how might you refocus those?

ENERGYBIZ

We are looking at significant expenditures to upgrade the quality of our electric and gas systems.

Let’s start with gas. Toward the end of August, we submitted to the California Public Utilities Commission a pipeline safety enhancement plan. The first phase is a $2.2 billion investment in infrastructure, testing and other measures over the next four or five years. We will be looking at similar initiatives on our gas distribution plan. What we want to do is recognize that, as an industry, we have a major issue. Most of the infrastructure in the United States was built in the post-World War II boom years. We’ve got to start looking at refurbishing that infrastructure in a very significant way.

EARLEY

ENERGYBIZ

What about on the electric side?

We just completed a major, multiyear project that combined several control centers around the state to get to a state-of-the-art digital control system for our transmission. We will take similar steps to get the state-of-the-art controls for our electric distribution network.

EARLEY

20 E N E RGYB I Z November/December 2011

You are an engineer, and your predecessor came out of financial services and telecom.

How will your approaches to running PG&E differ?

ENERGYBIZ

EARLEY I can’t speak about my predecessor and what he focused on. But I really love being able to see the operations. I recently walked through one of the older substations here in San Francisco that is getting a total makeover. It is great seeing the ingenuity of our employees and our engineers as they figured out how to stage a complex project.

San Francisco is very different from Detroit.

ENERGYBIZ

EARLEY

I’m finding that out.

Is there anything about the culture of the city that is dictating how you approach the job?

ENERGYBIZ

It is great seeing the ingenuity of our employees and our engineers ...

Let me focus on the culture of our whole service territory, because this is an incredibly diverse service territory, geographically and culturally. We’ve got the big agricultural constituency in the Valley. One issue that I’m just learning about and that I didn’t worry about in Michigan is wildfires.

We have to make sure that we are being responsive to what the customers want.

EARLEY

In addition to being a utility executive, you serve on Ford’s board. What is your view on the emerging role of electric vehicles, particularly in PG&E service territory?

ENERGYBIZ

I absolutely hope San Francisco is in the forefront as the auto companies roll out more and more electric vehicles. I was able to forge good relationships between DTE and the auto companies.

EARLEY

ENERGYBIZ You recently were rumored to be interested in running for governor in Michigan.

I was asked. “Interested” is in the eye of the beholder. I was honored to be approached, but that’s not what I wanted to do.

EARLEY

ENERGYBIZ What’s your career path in the next four or five years?

EARLEY We’ve got three to five years of work at least to get to where I think this company ought to be. It’s not something that happens overnight. I’m going to be very busy.

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ON THE RAMPARTS OF CHANGE

22 E N E RGYB I Z November/December 2011

LEADERSHIP ROUNDTABLE

BY MARTIN ROSENBERG

UTILITIES ARE READY TO LAUNCH an unprecedented wave of capital investments as they deploy a

smart grid and a new era of generation. Trillions of dollars will be spent making natural gas lines safer and wringing ever greater efficiency from the energy sector. State utility regulators will be in the hot seat as the companies they regulate attempt to secure the revenue to cover their investments.

EnergyBiz recently sat down with state regulators from across the nation at a gathering of the National Association of Regulatory Utility Commissioners to discuss these issues and other major issues confronting regulators. Their comments, edited for length and style, follow.

An unprecedented wave of capital investments by utilities is coming. What are its dimensions?

ENERGYBIZ

We hear in the neighborhood of $1 trillion to $3 trillion in investment is coming on the electric side in the next two decades. And $1 trillion in water.

CLARK

What are some of the overarching changes shaping this investment?

ENERGYBIZ

ENERGYBIZ NARUC ROUNDTABLE 7/18/2011 Tony Clark North Dakota Colette Honorable Arkansas Kevin Gunn Missouri David Wright South Carolina

that we regulate are in an increasing cost cycle all at the same time, and that is eventually going to work its way into the political arena. That is an area that the industry, regulators and public policymakers need to keep a close eye on. We’re going to need to be able to tell our own story and emphasize the importance of the independence of the regulator, because that’s going to become a huge issue.

We’re already there. You only have to look at state legislative action. Kentucky There is technological convergence Timothy Simon was hit hard by the potential of legislabetween different utility sectors. TelecomCalifornia tion to change the composition of the munications and energy are coming together David Boyd Kentucky Public Service Commission to in the smart grid. In the electric industry Minnesota make it elected. The argument was that you have U.S. Environmental Protection Phil Jones they would then be more accountable to Agency regulations, which will cost utiliWashington the ratepayers. The messages that came ties several hundred billion dollars or more. from the legislature are a bit troubling.

And you have the upgrades that are going to take place with or without EPA regulations, which will We’ve had issues in other states where governors have probably cost several hundred billion dollars over the next become more active. In Florida, there was some question few years. On the natural gas side, we have increased focus on about whether regulators would be allowed to make indegas pipeline safety. It seems as though each of the industries pendent decisions on rate increases.

BOYD

Photos by Seth Joel

CLARK

energybiz.com E N E RGYB I Z 23

T H E E M B AT T L E D R E G U L AT O R S

LEADERSHIP ROUNDTABLE

Public service commissions cover up a lot of sins for legislators. We do things on occasion that the law requires us to do that may ultimately not be viewed by ratepayers and voters in a positive light.

GUNN

I would hesitate to equate necessarily elected or appointed with politicization because it can happen either way. Look at where there have been huge flare-ups in regulatory policy and a lot of them have been in states with appointed commissions. Whether you’re directly elected as a commissioner or whether you’re appointed as commissioner, you’re accountable somehow to the political process.

CLARK

HONORABLE This is the most challenging time to be a regulator. Costs are going up. We are the ones uniquely situated by virtue of our responsibilities to receive the information, apply the law, and arrive at a decision that is in the best interest of the people that we serve.

We’re a creature of the legislature by nature, so we’re never going to be purely independent.

We’re there to do what they didn’t want to do. A perfect storm for the ratepayer is here. We’re going to see increased costs. It’s going to happen a lot sooner than later. The rate increases are not going to be across the board. In a coal-aligned state it could be 25 or 30 percent.

In many cases, those are areas where their average income is lower than the national average.

WRIGHT

A perfect storm for the ratepayer is here.

Commissioner Honorable, as a member of the White House Smart Grid Working Group, what is your view about the impact of the smart grid revolution?

ENERGYBIZ

HONORABLE The Smart Grid Working Group of NARUC was formed to interact with our federal counterparts on broad policy issues associated with smart grid implementation. We have focused on the technical standards that would guide commissioners all over the country as they considered smart grid applications. We give guidance on issues such as interoperability — how will we ensure that the systems are able to communicate together. We have worked on consumer education and engagement. That’s how we will reap energy efficiency savings and also conservation savings. The other hot topics are who owns the data, cyber security, and privacy issues.

CLARK Smart grid costs will be huge. The Electric Power Research Institute has said it will cost us $300 billion to $500 billion for smart grid investments. They estimated that there was a multiple return of that on the cost savings side. Approximately 70 percent of the costs are on the “state side” of the rate-making equation in the distribution network. It’s not going to roll out the same in every state.

Do you see a need to regulate the kind of information that’s going to be collected and what’s done with that information?

ENERGYBIZ

Entrants to the marketplace want that data as well as the utilities. There is going to be a growing conflict among consumers, businesses, investor-owned utilities, competitors and independents and we’re doing our best to manage it in California.

SIMON

ENERGYBIZ

Last year there were 124 decisions by state regulatory bodies in the United States, up 30 percent from 2009. Are we entering a period of a lot more regulatory activity?

ENERGYBIZ

JONES It’s already started. Utilities are filing every 12 to 18 months and they’re also going to the legislature when they aren’t happy with our decision and asking for changes.

They want to get accelerated cost recovery on certain items.

In a state like mine that has a 15 percent renewable portfolio standard, there are increased costs associated with that.

24 E N E RGYB I Z November/December 2011

How might it be resolved?

CLARK The issue of privacy is one we can resolve. On cyber security, the leader is going to be the federal government. With regard to security and consumer privacy, it will require state and federal collaboration. We’ve dealt with this for years in telecommunications.

ENERGYBIZ What do state regulators need to do to speed utilization of the smart grid?

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T H E E M B AT T L E D R E G U L AT O R S

LEADERSHIP ROUNDTABLE

If more than half the country has smart meters in 18 months, will there be a revolutionary change in how rates are created?

ENERGYBIZ

GUNN We don’t know what we’re building the smart grid for. There is not an overarching concept that says the reason why we’re building the smart grid is because we want to move toward dynamic rate designs. We are not saying that we’re building it strictly for reliability. Everybody recognizes that the technology that we’re using is old and needs to be updated.

But why are we doing that? A lot of people would say that all smart grid means is it enables a utility to shut off your service when you don’t pay the bill.

It will cost us $300 billion to $500 billion for smart grid investments.

In Northern California we are probably ground zero for the smart meter and smart grid battle. I don’t think consumers, and to a large extent regulators, understood what we were not getting from a smart meter. We all have a belief that we’ll be seeing real-time pricing of electricity and consumers can begin to become more active in the demand and response markets. But investor-owned utilities in California have not done a very good job educating the ratepayers as to what the smart meter can and cannot do.

SIMON

BOYD The utilities in my state are cautiously approaching smart grid.

I think they want to be the second mouse to the cheese. Once the technology is proven, the cost savings are there and there’s a great deal more communication with ratepayers, you’ll see rapid deployment.

CLARK This issue of real-time pricing to me is an intriguing one. We talk about dumb rates and smart meters.

People like dumb rates. We’ve got 25 to 30 percent of consumers on balanced billing plans. People like predictability and they’re sometimes willing to pay a premium for it.

How will that consumer culture match up with smart grid?

26 E N E RGYB I Z November/December 2011

The greatest growth will be in those things that happen without consumers even knowing. You may have a smart grid meter on your wall that can cycle your air conditioner but it’s going to be invisible.

It will be most helpful if people understand their energy usage. You can take smart meter data and translate it very simply so people understand over a day, over a week, over a month when they are using a lot of electricity. You can translate that into slight behavioral changes. If you can give consumers simple signals with these very complex new technologies, you can begin to change their energy consumption. That can lead to shifts in rate designs.

GUNN

I have voted for smart meters. But then I go to New York and the Wall Street analysts tell me that building standards are going to have more of an impact on consumption than the human behavioral impacts of smart meters.

SIMON

Consumers care about bills, not rates, so they’re going to open the envelope and they’re going to look at the bottom line. If we offer tools that help them lower their bills, they’re going to be effective. There are even lower-tech ways to do that. There are competing companies around the country that have used bill inserts to talk about the amount of energy used in neighborhoods. That has proven to be effective at inspiring the competitive spirit in consumers to lower their bills.

BOYD

When consumers can elect not to have smart meters installed, how does that affect the integrity of the smart grid deployments?

ENERGYBIZ

Consumers are going to have to pay to opt out on a monthly basis in order to maintain an electro-mechanical meter. Yes, a number of consumers, particularly in Northern California, are opting to opt out. We have a growing movement in California of people who feel that radio frequencies are having carcinogenic effects and other health impacts. Another issue is the distrust of the bills. My staff and PG&E are reviewing whether the smart meter deployment and scheduled rate increases have resulted in a disproportionate amount of bill increases. PG&E has taken the position that the analog meter was not working and bills are now more accurate. I don’t like that answer, so we’ll take a closer look. But yes, we will see a measurable amount SIMON

(Left to right): David Wright, South Carolina; Phil Jones, Washington; Kevin Gunn, Missouri; David Boyd, Minnesota; Colette Honorable, Arkansas; Timothy Simon, California; Tony Clark, North Dakota.

of opt out in California. In PG&E’s territory, right now we have 150,000 potential opt outs.

ENERGYBIZ

Are other states worried

about that?

HONORABLE In Arkansas, we recently approved our comprehensive three-year energy efficiency programs and we have opened a separate docket, which is pending, to explore the option of allowing industrial and large commercial customers to opt out. We have to ensure that those who choose to opt out are able to do so and achieve equal or greater savings than what they could achieve working with their local utilities. A Walmart, for instance, is very savvy and quite frankly leading the way.

However, there may be others who have not yet achieved the level of efficiency that would allow them to opt out.

The goal is energy savings.

Turning to nuclear power, do state regulators have a role to play in reviving the nuclear option in this country?

ENERGYBIZ

Yes and no. As watchdogs for the ratepayer we have an obligation to vet any additions to the generation fleet to make sure that they pass muster. Plants that can be built with or without federal loan guarantees that are designed in a way to be competitively priced are projects we can and should support. There are very few companies that have a balance sheet to support building the large-scale plants that are going in now. If we do succeed in developing the small modular units, that’s where we’re going to see a lot more play. In my state there are lots of people who would oppose any changes to our nuclear fleet without having the federal government address the spent fuel issue.

BOYD

ENERGYBIZ What will be the impact of our growing reliance on shale natural gas?

CLARK The amount of resources that are coming online are very real. But I do have a concern about the dash to gas.

I once heard someone say that the quickest way to ensure $10 gas is for every utility in the country to build on the basis of $5 gas. We simply can’t convert everything to natural gas.

BOYD I’m thrilled that we have a domestic fuel source that is abundant that can be part of our balanced portfolio. energybiz.com E N E RGYB I Z 27

T H E E M B AT T L E D R E G U L AT O R S

LEADERSHIP ROUNDTABLE

There are a number of gas liquefaction applications now before the Department of Energy and the Federal Energy Regulatory Commission. I don’t think we can just be on autopilot. There will be upward pressure on gas prices.

SIMON

We have some tools in our toolkit, like long-term purchase power agreements, that allow for stability in pricing.

HONORABLE

I have concerns about policy’s impact on technology.

SIMON In California, we have a gas incentive mechanism that takes our hedging models and puts shareholder dollars as well as ratepayers’ in the game based on a collar that’s established. That is ensuring that risk in the commodity markets is reasonable.

Shale gas, or unconventional gas, is going to be an amazing game changer for the United States in so many areas. But we only have a handful of states that actually regulate fracking. We’re fully committed to a thorough environmental review to ensure that we’re not in any way causing unnecessary damage to water tables, creating seismic issues or other problems.

Do you think we need a national renewable portfolio standard?

ENERGYBIZ

native fuel choices for generation — distributed or central — the better. One thing that I’m very disappointed about in California is where are the green jobs?

What are some of the leading disruptive forces facing the energy economy in the United States?

ENERGYBIZ

I am most concerned about disruption of policy — inconsistent policy that’s nonsustainable. We have a history in this country of starts and stops in energy policy, which is very damaging.

JONES

There’s a certain apprehension about making 40- or 50-year decisions and being sure that we’re making the right decisions.

BOYD

SIMON

I have concerns about policy’s impact on technology.

WRIGHT We have all these regulations and potential rulemakings coming down that are going to increase the cost of electricity without creating 1 megawatt of new power.

If we as a regulatory community and utility industry decide that we’re going to build nothing but gas and the federal government does a turn on the dime on fracking, then all of a sudden we’re going to strand a lot of investment in this country.

CLARK

There is a role for the federal government to play ensuring clean air, clean water and the environment. But we need balance. We know our utilities, the consumers and others better than anyone in our states.

HONORABLE

I worry about the ability of one single decision, one election, one change in governor that will fundamentally change the way the people have been doing business for a long time.

If states and businesses and consumers understand the conditions under which they operate, they will be able to adapt and adapt successfully. But right now we are in a period of time where we are frozen because no one knows what to do. We’re afraid of making bad choices because of the uncertainty. That creates inaction, which is the worst thing that you could do for this industry. You cannot have investments.

Consumers can’t make the choices that they need to make that benefit them.

GUNN

I absolutely do not. We’ve got resources all across this country and some of them are specific to regions. Those renewables that are available need to be worked.

WRIGHT

We’re at a 33 percent renewables standard and our governor says that he believes we can reach 40 percent. He wants 12,000 megawatts of distributed generation. I know that California is going to lead in this space regardless of whether or not there’s a national renewable portfolio standard. From an investor standpoint, the more certainty that we can create for investors to go into a multitude of alterSIMON

28 E N E RGYB I Z November/December 2011

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The State of America’s

Nuclear Effort MOV ING BEYOND FUKUSHIM A

BY RICHARD SCHLESINGER

with unfulfilled expectations, it’s the nuclear energy industry. Even before Three Mile Island in March 1979, the number of planned nuclear plants was shrinking, largely because of the intense capital requirements. After the event, the industry simply fizzled. The River Bend plant in Louisiana, now operated by Entergy Nuclear, turned out to be the last new plant built for more than 30 years, and construction at River Bend began the year before Three Mile Island. Any hope for a nuclear revival was dealt a final blow by the toxic fallout from Chernobyl in 1986.

But, of course, the industry wasn’t stone-cold dead.

Plants continued to operate without incidents, operating costs proved lower than for comparably sized carbon-fuelbased plants, and when people realized the environment was warming up, so did prospects for clean-burning nuclear. With passage of the energy act of 2005, which included subsidies for nuclear, prospects brightened to the point where Paul Genoa, director of policy development for the Nuclear Energy Institute, felt he had to manage expectations and cautioned against using terms like “nuclear renaissance.”

Perhaps because the United States has no defined energy policy, predictions about how it will evolve can be about as rational as predicting next year’s fashion trends, one moment retro — clean coal today, gas tomorrow — the next moment, future-shock — nuclear, wind, solar, or cow-dung-to-clean electrons, for that matter. But for the first time in decades, new nuclear plants are under serious consideration. It’s too early to call it a renaissance, but the Nuclear Regulatory Commission had received 28 applications for new plants as of the first quarter of 2011, and while it’s unclear how many of those will actually go forward, Genoa thinks a realistic estimate is that IF EVER AN INDUSTRY WAS PLAGUED

30 E N E RGYB I Z November/December 2011

12 companies will continue to pursue licenses for as many as 18 plants over the next few years.

Southern Company’s Georgia Power has two new plants in preliminary stages of construction, and South Carolina Electric and Gas has begun work on two plants at its V.C. Summer Nuclear Station in Jenkinsville, S.C. Southern is completing foundation work for its plants and, according to Cheri Collins, general manager of external alliances, expects to receive NRC approval for its combined construction and operating license by the end of the year. She expects one of the plants to be operational in 2016 and the other the following year.

Rhonda M. O’Banion, spokesperson for SCANA, SCE&G’s parent company, sees a similar timeline, with combined construction and operating licenses no later than early 2012, and 2016 and 2019 as targets for the plants to be operational. The company’s bet on nuclear is significant. “We will dispatch the nuclear plants as baseload units operated at full capacity whenever capable, and they should account for about 56 percent of our generated electricity,” O’Banion said. Including other non-emitting generation, SCE&G anticipates their non-emitting total will be around 60 percent in 2019.

On the downside, in April, citing regulatory uncertainty following the Fukushima disaster, NRG announced its withdrawal from a joint venture with Toshiba to develop two nuclear plants in Texas. Today, there are only five nuclear plants in some stage of construction in the United States, and that includes the Tennessee Valley Authority’s Watts Bar Unit 2 plant, whose original construction license was granted in 1973.

Four nuclear projects in the early stages of development and an additional resurrected one hardly sounds like a renaissance. But prospects for a resurgence of nuclear power

A heavy lift derrick is performing foundation work.

The containment vessel plate arrives for Vogtle Units 3 and 4.

Unassembled circulating water piping for Vogtle units.

The containment vessel assembly.

energybiz.com  E N E RGYB I Z 31

Photos courtesy of Southern Company

Work is proceeding on the modular assembly building for Vogtle Units 3 and 4.

may be better than those numbers suggest. The fallout from Fukushima is far less than expected, and it is clear that the United States will not follow Germany in abandoning nuclear energy. Horrific as the Fukushima meltdown was, it’s unlikely to have anywhere near the impact that Three Mile Island had, and nothing like the deadening effects of Chernobyl. Overall, political sentiment remains pro-nuclear.

President Barack Obama has reiterated his support, and public sentiment remains surprisingly positive. While public sentiment, as measured by the NEI, fell slightly immediately following Fukushima, by mid-July 50 percent favored industry expansion, and a healthy 62 percent of what the report calls “opinion leaders” have a favorable attitude toward the nuclear industry. And in areas where nuclear plants are already operating, public sentiment is even more favorable.

According to the NEI survey, 86 percent of the population living near nuclear plants views them favorably and 67 percent would welcome additional plants.

People seem to recognize that U.S. nuclear plants have little in common with those at Fukushima. Perhaps most importantly, Japanese regulatory agencies were clearly nowhere nearly as stringent as the NRC. Following Fukushima, the NRC reviewed all currently operating nuclear plants and all pending applications for new plant construction. The fact that no plant has been shut down and that plans for the sites being developed by both SCE&G and Southern Company were re-approved suggests that fears of lengthy approval delays are unfounded.

The greatest obstacle to new plant construction remains the capital intensity of nuclear plants, which NEI’s Paul Genoa sees as the industry’s greatest challenge. That, and the rate uncertainty in deregulated states, make expansion of nuclear in those areas extremely unlikely at the present, according to Ed Tirello, senior advisor, investment banking at Tudor, Pickering, Holt & Co. But in regulated states, particularly in the Southeast, the case for nuclear can be very strong. Tirello identifies several factors in its favor, particularly the South’s strong economic growth, driven in part by the cheap, reliable power nuclear provides; the increased residential demand that follows strong industrial growth; nuclear’s cheap operating costs; and the ability of nuclear to run around the clock, except for scheduled downtime every 12 to 18 months. That could prove particularly valuable as sales of electric cars – which would typically be recharged at night – increase, and as smart metering helps shift loads to off-peak hours.

Genoa also cites low operating costs as a tremendous positive for nuclear. Roughly 70 to 80 percent of the cost of fossil-generated electricity goes to fuel; conversely, about 80 percent of every dollar sold of nuclear-generated electricity is spent on largely high-paying jobs. In other words, 32 E N E RGYB I Z November/December 2011

the levelized costs of nuclear-generated electricity — the total cost when factoring in fuel and capital over the lifetime of the plant — is lower for nuclear than for coal and only slightly higher than for combined-cycle, natural-gasfired plants without carbon-capture and storage. If carbon were priced, nuclear would come out ahead of any fossil-fuel-powered source. Furthermore, since it represents such a small part of the total cost, any fluctuation in the price of nuclear fuel is far less significant than possible fluctuations in the price of natural gas.

Still, natural gas represents another of the unanticipated forces that have influenced the course of nuclear. After the rush to gas at the end of the ’90s, the industry was burned when the price skyrocketed to $14 per thousand cubic feet.

The discovery of vast sources of shale gas and the success of hydraulic fracturing has caused the price to plummet, and gas suddenly looks extremely promising again.

In just the year between 2007 and 2008, production surged a staggering 71 percent. Still, at $4, the domestic price is half the price on the world market, and at that disparity it makes sense to convert port facilities originally designed for importing liquefied natural gas from abroad to exporting it. In September, the Wall Street Journal reported that South Africa-based Sasol plans to build a $10 billion plant in Louisiana to convert natural gas to diesel fuel for trucks and other vehicles. All of this simply means that it’s unlikely gas will remain at today’s low price for long.

It remains extremely unlikely that nuclear plants will be built in deregulated states for now. “If you’re going to build in a merchant state right now, with no price on carbon and none in the foreseeable future, and with gas at today’s price, you’ll build gas, not nuclear,” said NEI’s Genoa. Tirello agrees that any new nuclear plants will be built where similar plants are already operating. He points out that the sites where both Southern Company and SCE&G are building new plants were originally designed to accommodate twice as many plants as were built, so it’s not as though construction has to start from scratch; the infrastructure to handle the new plants is in place, transmission is adequate and the control rooms were built to handle the additional plants. “New nuclear plants will be built where nuclear is already operating in regulated states,” Tirello said. “A merchant nuclear plant in this market is probably not a prudent idea.”

New nuclear plants will be built where nuclear is already operating in regulated states.

NUCLE A R EFFORT

Addressing Nuclear Challenges THE HUR DLES OF COSTS AND PUBLIC PERCEPTIONS

BY DAVID BOYD

is a complex matter that asks the industry to find a path forward that acceptably balances many different factors.

Once one acknowledges that every generating technology carries physical, financial and environmental risks, the conversation can begin in an intellectually honest manner.

In the case of the nuclear industry, the issues frequently discussed are the costs of new construction, safety and fuel management.

Why would a utility consider nuclear power when public opinion on the risks and rewards appears to swing more significantly than it does for other technologies? A response requires taking stock of the broader situation as it stands today, and then focusing on the nuclear industry specifically.

We are entering a period where utilities will retool their generation fleets for the next 40 or more years. Construction will need to be phased over time, and the optimum portfolio could change with the passage of time. Policy drivers of this build-out include electricity that is reasonably priced, increasingly low carbon and as clean as possible, together with North American Electric Reliability Corp. and Federal Energy Regulatory Commission mandates for reliability.

In addition, the evolving domestic gas supply, economics and the anticipated U.S. Environmental Protection Agency mandates dictate that coal use will be reduced in the near term. Some argue that this translates into a natural-gasdominated electricity sector. While I accept a movement to natural gas in the near term, that fuel will not yield the complete decarbonization of the electricity sector necessary to meet, for example, the goal to reduce total greenhouse gas emissions to 80 percent below 2005 levels by 2050, as per a Minnesota statute, among other state and federal guidelines. While we have made significant progress with wind and other renewables that support the greenhouse gas targets, questions remain regarding the cost and reliabilTHE FUTURE OF THE U.S. ELECTRICITY PORTFOLIO

ity of integrating very large quantities of renewable energy into the grid.

So is there is a place for new nuclear in our generation fleet? Advocates suggest that the answer is yes, with careful consideration of specific issues. Aside from hydro, nuclear plants are the only low- or no-carbon baseload option of significant scale for many states. Nuclear is also a part of a balanced generation portfolio that is prized by many — but at what cost, at what scale and under what circumstances? If the goal is to maintain the present 20 percent of electricity generation from nuclear, we will need to replace 40 reactors whose operating licenses expire by 2030.

There are a number of hurdles that remain for expansion of nuclear power in the United States. Chief among these is the capital cost of construction. Despite projections that the levelized cost of electricity from newly constructed plants will be competitive with other generating technologies, the project costs are so high that most utilities would be betting their futures by pursuing a new reactor. In addition, the first movers would need to develop new institutional knowledge and confront the preparedness of our domestic workforce. This could add significant costs, even though the effect would benefit those who might follow.

Although the federal government has authorized loan guarantees to help overcome these barriers, they are significant issues that limit early movers in the industry.

Secondly, the federal obligation to take possession of spent fuel and place it in a repository, as dictated by the Nuclear Waste Policy Act and standing contracts with the utilities, has not been fulfilled, and this inaction adds to uncertainty. The Blue Ribbon Commission on America’s Nuclear Future has proposed policy actions to address this issue. Even with swift acceptance of the commission recommendations, it may be 12 years before any spent fuel begins to move from present storage sites. Furthermore, there remain matters of active litigation over the suspension of licensing activities for Yucca Mountain, and disputes over the Nuclear Waste Fund fees.

David Boyd is a member of the Minnesota Public Utilities Commission. energybiz.com E N E RGYB I Z 33

Financing Renewables Going Forward W HO W ILL FINANCE THE ENERGY FOR OUR FUTURE?

BY GARY M. STERN

for renewable projects slowed down in 2011 due to deficits and backlash against increased governmental spending. Tax credits, however, remained to help offset the cost of new renewable projects.

At the same time, three innovative solar companies, Solyndra, Evergreen Solar and SpectraWatt, filed for bankruptcy, despite the $527 million of federal loans invested in Solyndra. If governmental subsidies are diminishing and some renewable startups are going out of business, who will finance the industry to help it grow in the United States?

Because of these cutbacks, “growth in renewables will slow down,” says Dennis McGinn, president of the American Council On Renewable Energy. He prefers the term “incentives” to “subsidies,” saying incentives enable an emerging industry to grow more rapidly. For every million dollars invested in renewables and clean energy, 17 jobs are created, outpacing job creation in oil, gas and defense industries.

Private industry is filling in the gaps. For example, over the last five years, GE Energy Financial Services has invested $5 billion in renewable projects, mostly solar, but also wind, hydro and geothermal, says Kevin Walsh, a Stamford, Conn.,-based managing director and leader of power and renewable energy at GE. He describes this financing as “good, solid investments in proven technologies with good economics and strong counterparties and the vast majority have long-term contracts.”

FEDERAL AND STATE FUNDING

34 E N E RGYB I Z November/December 2011

Walsh also noted that the 30 states that have introduced renewable portfolio standards create a climate for investment based on savings from tax credits; he estimates that 75 percent of GE Energy Finance’s renewable projects are invested in those states. In the states with renewable standards, it’s easier to employ debt financing and tax equity. In the states without standards, “You may have difficulty convincing a utility to buy power that makes sense economically,” he says.

Nor is Walsh deterred by the failure of some solar startups. He says First Solar is prospering and there’s a natural shakeout in solar as there was in technology. The solar firms that are “scaling up and increasing efficiency” will prevail, he suggests.

The Motley Fool contributor Travis Hoium noted, “Renewable energy bashers like to point to unsustainable subsidies as the major reason energy isn’t worth investing in. However, they fail to remember that most coal and natural gas power plants were built decades ago and benefited greatly from government subsidies.”

Renewables are making steady progress, said Richard Caperton, a senior energy policy analyst at the Center for American Progress, a progressive think tank. For example, in 2009, 10,000 megawatts of wind power entered the grid, he says.

Why then do renewables supply only 11 percent of American power while coal-fired plants generate 50 percent of the power? “We’ve built coal power plants

for 100 years, and making a percentage difference will take time. Getting to 20 percent renewable will take years. This is a 50-year effort to convert our power to zero-carbon power,” Caperton said.

But solar growth is still modest. According to the Energy Information Administration, there were 18,833 megawatts of new capacity introduced in the United States including coal, gas, wind and solar between January 2010 and January 2011, says Mike Taylor, director of research at the Solar Electric Power Association. But solar accounted for only 4 percent of new generation, so the solar push that many experts expected to see hasn’t fully taken off.

Even the energy companies that have been successful in increasing their renewable portfolio need governmental subsidies to defray costs. NextEra Energy Resources, a subsidiary of NextEra Energy, derives 44 percent of its portfolio from wind, 35 percent from natural gas, 13 percent from nuclear, 2 percent from hydro and 1 percent from solar. Spokesperson Steven Stengel attributed the increase in wind generation to “wind turbines being much more efficient and cheaper than they were several years ago. We’ve been able to build wind farms in locations that many years ago we may not have been able to do.”

Stengel noted that the 2.2 cents per kilowatt-hour tax credit for wind projects makes it cost-efficient for its customers. He emphasizes that renewables depend on public policy support to stay price-competitive with other forms of power.

But critics say minimal governmental support is restricting increased use and investment in renewables. Donald Furman, former president of the American Wind Energy Association and currently a senior vice president for Iberdrola Renewables, a wind energy company based in Portland, Ore., puts the blame for only incremental growth squarely on the federal government.

America spearheaded developing renewable energy 20 years ago and “has given it away because we haven’t had a coherent national policy supporting renewables,” Furman has noted. China has taken the lead because of its massive governmental financial support for renewables. Furman said a strong renewable policy in the United States would create 274,000 jobs by 2025 with every state seeing job growth.

What the United States needs is for policymakers to “get over 2011 and start thinking about 2025,” says McGinn from ACORE. What kind of energy power do we want our kids to live with in the future? If a price were placed on the use of carbon, renewable investment would spike. Thomas L. Friedman, author of The World Is Flat, has noted, “The only effective, sustainable way to produce green jobs is with a fixed, long-term price for dirty fuels that thereby creates consumer demand for, and sustained private sector investment in renewables.” energybiz.com E N E RGYB I Z 35

THE FUTURE OF FOSSIL FUEL GENERATION

RESEARCH REQUIRED STILL A WORKHORSE // BY THOMAS F. ARMISTEAD IN 2035, 20 percent of the U.S. population will be over 65 years old, human presence on Mars may be an established fact, and India is forecast to be the world’s third-largest economy, but the U.S. power sector’s generation profile will be essentially what it is today: 69 percent of the nation’s power will still be generated by fossil fuels. The main difference will be shifts among the fuels’ respective market shares.

Coal’s share of the total generation mix will remain larger than any other fuel’s, but it will decline from 45 percent to 43 percent, yielding market share to gas and renewables, says the Energy Information Administration’s annual energy outlook. Natural gas’ share of power generation is expected to grow from 23 percent in 2009 to 25 percent in 2035, largely on the strength of low fuel prices and stable capital costs for new plants. Petroleum will account for the remaining 1 percent of the fossil-fuel use, as it does now.

At 45 percent, coal already has lost substantial market share, down from the 50 percent or so it reliably held for many years, and the EIA now projects a complex future for coal-fueled generation. Assuming no additional constraints on carbon emissions, the number of kilowatt-hours generated using coal increases by 25 percent from 2009 to 2035, but that will increase coal-fired generation only 10 percent 36 E N E RGYB I Z November/December 2011

over pre-recession 2007 levels, largely because of increased use of existing capacity.

National average real minemouth prices for coal have risen rapidly in recent years and stood at $1.67 per million British thermal units in 2009, said the EIA, but the agency projects a more stable future, with the price reaching $1.73 in 2035. Natural-gas prices have been even more volatile in the last decade, but shale-gas discoveries have tamed them since 2009.

The EIA projects price growth at the Henry Hub to average 2.3 percent annually to 2035, raising the price from $3.95 per million Btu to $7.07. Even so, the price is not expected to exceed $5 until 2020.

Owners and developers of generation plants can look forward to a future somewhat less turbulent than the recent past. Since the 1965 Northeast power outage, power capacity construction has been notorious for boom-and-bust cycles. The boom in gas-turbine capacity additions that accompanied the restructuring of the power industry peaked at about 58 gigawatts in 2002, and then fell abruptly. Its subsequent tapering decline was extended by a swell in coal-plant construction, which is now subsiding.

The government projects the addition of 223 gigawatts by 2035, including both utility and end-usegenerator capacity. It notes, however, that additions

in 2010, 2011 and 2012 averaging 17 gigawatts annually will “drop significantly after 2012 and remain below 7 gigawatts per year until 2025.” About 46 percent of the early builds are renewable capacity, taking advantage of federal tax incentives and fulfilling state renewable-portfolio mandates. Between 2025 and 2035, additions will average 11 gigawatts annually, of which 80 percent is expected to be natural-gas-fired.

Regulation of carbon emissions is one of the issues that brought Congress to deadlock. Whether U.S. political leaders accept or reject the need to limit carbon-dioxide emissions, however, the country will almost certainly be compelled eventually to enact them. Countries throughout the world are moving forward with their own carbon programs for their own reasons, and the United States will come under increasing political and diplomatic pressure to follow suit. The key to the future of fossil fuels in power generation then will be carbon capture and sequestration, a portfolio of technologies for separating CO2 in a power plant’s emissions, capturing the gas, compressing and transporting it, and injecting it into deep, permanent geologic storage.

These technologies are known today, but research into making them work smoothly, efficiently and competitively on a commercial scale has barely begun.

For utilities, however, projections and statistics mask the insecurity of planning in a time of regulatory indecision and changing fuel prices. Environmental damage is the Achilles’ heel of fossil fuels, said Tom Sarkus, a division director at the National Energy Technology Laboratory in Pittsburgh. The industry has succeeded in reducing emissions of particulate matter, sulfur dioxide and oxides of nitrogen, and mercury and carbon dioxide will be next, he said. The momentum for legislation to curb greenhouse-gas emissions has stalled, though, leaving utilities without a federal standard to guide their planning for capacity growth.

Sarkus is optimistic about being able to meet the environmental challenge. He was researching technologies to address acid rain in the 1980s, so when the Clean Air Act Amendments of 1990 mandated SO2 and NOx reductions, development of the technologies to achieve them was well advanced. “As we gain experience and knowledge, we can apply the knowledge and decrease the cost,” he said. “I’m confident we can do the same thing with carbon dioxide.”

Environmental damage is the Achilles’ heel of fossil fuels.

Technologies now in development that could materially alter the picture for fossil fuels in the mid to long term include oxy-combustion, fluidized-bed combustion, gasification, and fuel cells, Sarkus said. Oxy-combustion burns pulverized coal with nearly pure oxygen. The exhaust gas then produces highly concentrated CO2 for easy capture and sequestering. Fluidized-bed combustion suspends the pulverized fuel with air jets in the combustion chamber, facilitating complete combustion.

It can be used to burn lower-Btu fuels and operates at lower temperatures than conventional combustion technologies, thus avoiding nitric oxide emissions.

Gasification is a chemical process that converts coal to gas using temperature and pressure. The CO2 is easily separated from the flue gas for capture and sequestering. Elements of these technologies have been known for years, but integrating them and making them economically competitive at commercial scale is the challenge with which the industry is now wrestling.

If in the future we are unable to use fossil fuels for power generation without harm to the environment, it won’t be for lack of trying. In 2003, the Department of Energy announced the FutureGen program to develop the world’s first near-zero-emissions coal-fired power plant in partnership with an alliance of coal producers and utilities. The DOE abandoned the project five years later when its estimated cost rose from $1 billion to $1.8 billion, with more cost increases expected. FutureGen 2.0, estimated at more than $1.3 billion, was born in August 2010 with $1 billion from the Recovery Act and an agreement by the FutureGen Alliance, Ameren Energy Resources, Babcock & Wilcox and Air Liquide Process & Construction, to repower Ameren’s 200-megawatt oil-fired Unit 4 in Meredosia, Ill., with advanced oxy-combustion technology. The project will also capture 90 percent of the CO2 emissions and build a pipeline to Mattoon, Ill., where the CO2 will be sequestered in a new, deep saline injection storage facility to be developed by others.

In August, the Ameren-led team completed the initial engineering, design and economic analysis for the repowering and submitted its report to the DOE for review. If the DOE authorizes the project to proceed, the team will continue with detailed engineering design, schedule and cost analysis, and environmental studies to support permit applications. Construction could begin in late 2012, with a completion target late in 2015. energybiz.com E N E RGYB I Z 37

THE FUTURE OF FOSSIL FUEL GENERATION

The Case for Coal PRAIRIE STATE ENERGY CAMPUS FIRES UP // BY RAJESHWAR RAO IF YOU HAPPEN TO LIVE IN THE MIDWEST, the country’s most abundant source of energy may be right beneath your feet. With the United States having more than 25 percent of the world’s coal reserves producing more than 50 percent of the country’s power, coal is producing stable, low-cost, environmentally safe power for millions of American families. A part of the new generation of coal, the newest coal-fueled power plant in the nation, Prairie State Energy Campus, is currently under construction in southern Illinois, in Washington County. Indiana Municipal Power Agency has invested on behalf of its owner-members in Prairie State Energy Campus and will be receiving power at the end of 2011. Eight of the Prairie State Energy Campus owners are public power utilities, like IMPA, that are operated by local governments to provide communities with reliable, responsive, not-for-profit electric service.

The state of Illinois’s underground geography is 65 percent coal, representing 38 million metric tons.

The energy from Illinois’s coal supply is more than the fuel reserves in Saudi Arabia and Kuwait combined; and it produces nearly half of the state’s electricity supply. Due to its high sulfur content, Illinois coal mining fell in production following the Clean Air Act restrictions of the early 1990s. Today, new technology and emission controls are providing options to use Illinois basin coal in the cleanest possible ways. Since 1970, emissions from coal-fueled power plants have been reduced by more than 80 percent while electrical output has almost tripled.

Prairie State Energy Campus is a minemouth energy complex with a 6.5 million tons-per-year coal mine located directly next to a supercritical, 1,600-megawatt power plant. Its owners and investors are eight public power utilities and Peabody Energy. The Prairie State owners will use its power to provide electricity for more than 2.5 million families in Missouri, Illinois, Indiana, 38 E N E RGYB I Z November/December 2011

Kentucky, Ohio, Michigan, Virginia and West Virginia.

With more than $1 billion in emission controls, the Prairie State project will be the cleanest coal-fueled power plant in the nation. Without factoring in its state-of-the-art emission controls, its supercritical steam/electrical generating process is more efficient, allowing it to emit 15 percent less than a typical coal plant. Considering Prairie State’s emissions controls, it will remove 98 percent of SO2, 90 percent of NOx and more than 99 percent of particulate matter, the most commonly tracked emissions.

In addition to being an abundant, safe and clean energy source, an additional advantage of coal is its low and stable cost of supply. According to the Energy Information Administration, coal costs around one-third to one-quarter of the price of other fuels such as natural gas, one of the primary substitutes for coal for meeting baseload electricity needs. As the nation climbs out of a recession, affordable electricity is especially important. Lower-cost electricity helps retain existing manufacturing industry in the region and also attracts new corporations to locate in the area, which will help improve the unemployment situation. Although energy prices are going up in the rest of the nation, the Prairie State units coming on line with stable costs and environmentally responsible operations is a very positive sign for the economy.

Since breaking ground in 2007, more than 4,000 construction personnel have been on-site, building the project. When construction is completed in 2012, Prairie State will employ more than 500 people on a full-time basis and will be one of the largest contributors to Washington County’s tax base.

A study completed by the University of Illinois predicts that Prairie State will stimulate an additional 860 jobs and will inject an extra $80 million of earnings into the Illinois economy. With $1 billion invested in environmental emissions controls, the facility is the cleanest coal plant in the nation and represents the future of coal-fired energy.

Rajeshwar Rao is the chairman of the Prairie State Energy Campus management committee.

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The Quintel-PSE&G Project Team Partnership is a Case Study of Success.

The PSE&G SAP CRB/CRM implementation won the 2010 CSWEEK award for Best Customer Service Implementation.

BACKGROUND Over the past ten years Quintel has focused on Fast Track SAP solutions for the utilities industry using our utilities templates. This case study focuses on Public Service Electric & Gas (PSE&G), an electric and gas utility with over 4 million customer contracts and three service categories (electric, gas and appliance service). PSE&G replaced its 29 year old legacy CIS system, Interactive Voice Response (IVR) Unit, Customer Web application, and its Gas system.

PSE&G had over 100 systems connected to the central mainframe legacy systems. The legacy systems were over 30 years old and could not easily support changes in requirements, including new rates for the competitive Appliance Service Business, new environmental programs, enhanced IVR functionality or an integrated web-site.

PSE&G engaged Quintel Management Consulting for its implementation partner. Quintel was the sole system integrator and provided overall Program and Project Management for all phases of this project including Blueprint/Design; Realization/ Build; Go-Live; and, Post-Go-Live Support.

PROJECT GOALS The Quintel-PSE&G project team undertook the responsibility of delivering a set of aggressive business goals.

• Deliver a system that would be fully integrated with existing financial and HR systems.

• Deliver a call center, billing and mobile workforce management for electric, gas and appliance services business units.

• Provide an SAP Customer Relationship and Billing (CRB) and Customer Relationship Management (CRM) solution that meets or exceeds the current performance levels for Company’s customer service operations – billing accuracy and service levels for customer calls, credit and collection, and service order and appliance service appointments.

• Create a new self-service website • Implement SAP – Mobile solution to include customer service related processes (meter, move in/out, disconnects, and collections) and appliance service functionality.

• Provide improved scheduling and dispatch functionality through implementation of Multi-Resource Scheduling System (MRSS)

• Move electric meter technicians to electronic work orders • Provide reporting and query functions FUNCTIONALITY IMPLEMENTED In order to meet the project objectives, the implementation included the following SAP modules: • All SAP CRB modules (Customer Relationship Management (CRM), Billing, Finance and Device Management) • SAP Mobile (MAU), • SAP Multi-Resource Scheduling (MRSS) • SAP Service management (SM, HR-ERP), • SAP Retail access (IDE) • SAP Settlements (EDM) • SAP Customer web self services (UCES module) • Business Process Exception Management (BPEM) • SAP Business Intelligence (BI) • GPS and GIS functionality and integration • Outage Management integration • New IVR system • Bill printing system (SAP Print Workbench and Metavante) AN INNOVATIVE APPROACH Given the aggressive project goals an innovative approach was required.

First, a true Quintel-PSE&G partnership was formed at all levels of the project organization. This resulted in common project goals for both Quintel and PSE&G and an open approach to evaluating the PSE&G’s go-live readiness.

Second, the project team incorporated a billing hotspot testing approach to improve billing accuracy at go-live. This required significant coordination between the billing, data conversion and development teams.

Third, the project team implemented an innovative approach to joint design, joint prototyping and joint testing between the functional team, the technical team and the business owners while maintaining all Quality Assurance standards in specification development, coding and testing. This approach led to innovative designs in a number of areas including BPEM workflows; MRSS messaging to manage emergency work, safety concerns, schedule changes and overtime; and, MAU interfaces with payroll, materials management and GIS routing and MAU functionality for supervisor approval.

40 E N E RGYB I Z November/December 2011

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Fourth, the project team implemented robust functionality for the competitive market conditions in New Jersey. In addition, PSE&G is positioned to respond to future AMI requirements.

• The mobile system is fully integrated with the CRM and billing system, thus real time updates are possible for collections and appointments.

• The SAP MRSS module was implemented for sophisticated CHANGE MANAGEMENT AND TRAINING dispatch and scheduling.

A major aspect of the Quintel-PSE&G success was the imple• The mobile system is fully integrated with time sheet reportmentation of a robust change management process. The business ing and with the Geographical Information System (GIS). had to adjust to 38 new Customer Operation roles, 20 new roles • GPS was implemented so supervisors can determine where in gas and electric distribution and new reporting roles. each truck is located and jobs can be dispatched from the GIS system based on technician location.

PROJECT SUCCESSES • The Outage Management system 30% Call Abandonment Rate PSE&G was able to realize signifiis also fully integrated so the work 25% cant benefits through its partnership force can readily and effectively with Quintel and its implementa20% respond to outages. tion of the SAP software suite. The 15%

project was completed on-time 10% ABOUT QUINTEL? and $5 million under budget with 5% Quintel is an SAP Partner Channel all required business functionalPartner for the small and mid mar0% ity. In addition, the project yielded ket utility and large enterprises. significant savings and efficiency Quintel is a 100% woman owned gains for the company: business and is a provider of Manage• Improved Customer Service effiBilling Exceptions Average ment Consulting and IT services that ciency through an increase in the specializes in performance improvecompany’s ability to resolve cusment for utilities (Investor Owned, tomer inquiries with the first call.

Cooperatives, Districts and Munici• Improved Billing palities) (electric, water, wastewater, • Increased billing accuracy – gas, power generation). Quintel has reduced billing implausibles completed numerous management • Increased paperless billings consulting projects and 20 SAP soft• More efficient cancel-rebill ware implementations over the last process ten years.

• The company was twelve Our consultants have over 20 months ahead of schedule with years of utility consulting experirespect to savings in the billing ence and project management skills. area. The new system has autoOur IT services include software mated a large number of bills selection, business case and project that were traditionally re-billed plan development and full system manually, thereby creating signifiintegration services. cant savings.

• Improved customer self-service ability through web enabled functionality reduced inquiries For more information please contact us: into the call center and the rate of web enrollments since http://www.quintelmc.com go-live exceeded expectations.

Leslie Buttorff • Improved Scheduling functionality provided a more efficient leslie.buttorff@quintel-mc.com use of field resources.

Chris Compeggie • Field efficiency gains through the integration with SAP christopher.compeggie@quintel-mc.com Mobile and ESRI software to improve home reporting capabilities and to improve dispatchers’ ability to reassign work to the closest resource.

90 80

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70

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Billing Exceptions - Actuals

Billing Exceptions - Steady State

PSE&G has the most integrated SAP mobile implementation for utilities in the world. energybiz.com E N E RGYB I Z 41

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The State of

Renewables Standards POLICIES CONTRIBUTE TO JOB GROWTH // BY WILLIAM OPALKA — an eternity ago — a national mandate for utilities to obtain a fixed percentage of their electricity from renewable energy seemed almost inevitable.

After all, pro-renewables Democrats controlled Washington, more than two dozen states had a mandate and clean energy development was starting to be seen as a way out of the economic slide that had just gained steam, with no end in sight.

Quite a bit has changed in three years. National mandates are rarely discussed, the movement to add to the list of states has trickled to a crawl, and many proponents of the policy have been forced to defend existing requirements, or fend off rollbacks or repeals. Even the green jobs movement has lost some appeal with recent bankruptcies in the clean energy sector.

Today, 29 states and Washington have renewable portfolio standards and another five states have nonbinding goals.

The standard creates local demand, which has led to manufacturing and support companies setting up shop in the industrial heartland.

Just in those renewable standards states, the market could exceed 115 gigawatts of generation by 2025, some observers note. The Union of Concerned Scientists estimates a renewable energy standard of 30 percent by 2030 would lead to 63,000 megawatts of nonhydro capacity development in the Midwest, up from the current 13,000 megawatts.

California is one of the few places where the standard has been increased in the past year, with the legislature adopting the standard of 33 percent of electricity from renewable sources by 2020. It failed to reach a previous interim benchmark of 20 percent by 2010, now pushed back to 2013, but the utilities are getting closer, with most rates in the high teens.

Most states are on schedule to meet the requirements of low, single-digit percentages that exist in 2011.

JUST AFTER THE 2008 PRESIDENTIAL ELECTION

42 E N E RGYB I Z November/December 2011

But in places like wind-rich Iowa — which is ahead of schedule and is far and away the national leader, by percentage, in the amount of clean energy it produces — wind supplied more than 15 percent of electricity generation in 2010 and industry and state officials say the total is 20 percent this year.

The state is now a wind powerhouse, trailing only Texas in installed capacity. It surpassed the former leader, California, a few years ago and now has 3,675 megawatts, with another 619 megawatts under construction, according to the American Wind Energy Association.

Iowa appears to be the laboratory model that renewable energy proponents say the country should adopt for the emerging green economy: policy support that encouraged a remaking of the electricity marketplace, which, in turn, attracted a domestic manufacturing base to serve the new energy economy.

The state had a head start — though by modern standards, a rather modest one — that was probably revolutionary for the time. Iowa had the first renewable portfolio standard in the United States, a mere 2 percent, but the date is significant because it was all the way back in 1983.

A high-profile result of late is the 700 manufacturing jobs at the TPI Composites wind blade plant in Newton, Iowa, which was formerly the headquarters for Maytag before those jobs moved overseas.

Now, Iowa claims over 200 wind-related businesses currently operate in 55 Iowa counties and add $5 billion to the Iowa economy.

Colorado first passed a requirement by ballot initiative in 2004, but legislators have twice increased the percentage. That led to Danish turbine maker Vestas to locate three plants there that employ about 2,000 and supply its North American customer base.

“The supply chain in the United States is such a success story over the last six or seven years due to the growth of the

wind industry. So much more is now being manufactured here, along with the services around wind development and maintenance,” said Susan Williams Sloan, director of state relations for the AWEA. “Colorado certainly has made an effort by its 30 percent by 2020 standard. It has attracted Vestas and other manufacturers. We count as least 16 facilities in Colorado currently manufacturing for the wind industry.”

AWEA tallies national employment at 85,000.

Due to the nature of their technologies, larger-scale investments occur in wind manufacturing, while solar development tends to be labor-intensive. Small rooftop installations, with small companies blossoming to fill the void, rule the day. Take, for example, Pennsylvania.

Like many states, it has a modest carve-out for solar, in this case at one-half percent by 2021. That led to a recent explosion of installations, which were also aided by federal stimulus funds and state grants and credits that are set to expire.

Pennsylvania went from 8 megawatts installed in 2008 to more than 100 megawatts today. More than 4,000 solar panel installations now exist in the Keystone State. The boom created 6,700 jobs for installers and others. But that boom has more than doubled current solar requirements under the mandate, sapping new demand from utilities.

“So 6,000 jobs in the solar industry in Pennsylvania are very much at risk,” said Christina Simeone, director of the PennFuture Energy Center for Enterprise and the Environment in Philadelphia, which promotes renewable energy. “There are many policy options on the table that would not contribute to the state deficit or grow government that could save those jobs, but there doesn’t seem to be support.”

We saw a lot of questions this year, but for the most part we came out intact.

Pennsylvania’s government switched to Republican control last year and the state is also the hub of the shale gas industry. Support for renewables is waning and programs are expiring, with an uncertain future. And legislative attempts to roll back mandates are gaining steam, which is part of a larger national trend.

Opponents of mandates from New England to the Southwest have made numerous attempts to scale back the requirements. Outright assaults have failed. Proponents of renewables failed yet again to get a mandate passed in Indiana, having to be content with a voluntary goal of 10 percent by 2025.

In Wisconsin, a repeal effort was defeated, but local sourcing was weakened.

“A bill signed into law in July allows large-scale hydropower from Manitoba to be used to comply with the state’s existing standard. That’s great news for economic development in Manitoba, but it undermines the deployment of Wisconsin’s renewable resources and the local benefits it would bring,” said Jeff Deyette of the Union of Concerned Scientists.

“We saw a lot of questions this year, but for the most part we came out intact,” AWEA’s Sloan said.

Solar overall employs more than 1 million in the United States. Some high-profile failures occurred in the solar manufacturing space, including the bankruptcy of Evergreen Solar and closure of Solyndra, which tanked in the summer and displaced 1,100 workers, while leaving taxpayers on the hook for a $535 million loan guarantee.

Solon North America, a subsidiary of a German panel manufacturer, closed a Tuscon, Ariz., plant that it had opened in 2007. Another German manufacturer, SolarWorld, closed a California plant and consolidated operations to Oregon.

Both companies cited low-cost competition from China.

But the green jobs push is what has saved the effort so far.

How much longer can that last if China conquers the global solar market? A lot rides on that question. energybiz.com E N E RGYB I Z 43

Policies Spur Growth COLORADO’S SUCCESS WITH RENEWABLE PORTFOLIO STANDARDS // BY MATT BAKER

[ ]

does In 2004, the voters of Colorado passed the not occur as it would in other markets. For renewable energy standard ballot initiative. This COUNTER starters, most areas of the country are served by was the first voter-approved renewable energy monopoly providers. This means there is very standard in the country — and with legislative little incentive to seek innovative ways to create support it evolved over time to become one of the electricity. Secondly, most providers are heavily regulated, most progressive. The initiative set a requirement that Colooften compounding risk-reluctant utilities with risk-averse rado’s investor-owned utilities generate 10 percent of their regulators. In fact, according to a recent report from the retail sales from renewable resources by 2015. As it became American Energy Innovation Coun- apparent that the state’s largest utility would meet the renewcil, electric utilities spend a paltry able requirements years ahead of schedule, the Colorado 0.1 percent of their revenue on General Assembly has increased the standard twice to the research and development, far below now-existing 30 percent by 2020. Finally, the voters and the the U.S. industrial average.

General Assembly both mandated the entire program be The upside of this conservativeness halted if it increased utility bills by more than 2 percent. You has been the creation of ubiquitous, get the picture: Innovate but contain the risk. reasonably priced, reliable service.

In 2004, Colorado’s IOUs had negligible amounts of This has served our society well for wind and solar power. Today, 12 percent of their electricity the last hundred years, but unfortu- comes from these resources. Colorado’s utilities have intenately the future is unlikely to be like grated these variable resources with only minor costs and the past. Many parts of our electric system are facing the end have led the country in techniques to integrate intermittent of their useful lives and need to be replaced. In addition, the resources on the grid. fuels we use to power the electric system are subject to risky On the economic development side, Colorado is now and disruptive price volatility. A new set of environmental home to one of North America’s largest concentrations of considerations is forcing us to rethink the industry’s nearly wind turbine and tower production facilities. Our solar complete reliance on traditional fuels. If we are going to “win manufacturing cluster includes breakthrough thin-film the future,” we will need an electricity sector that is more technology that is revolutionizing the production of PV. As 21st century and less 19th century. The challenge is how to a first mover, Colorado is also home to many of the research, innovate without jeopardizing the widely available, afford- support, production and sales operations that are driving able, reliable service consumers have depended upon. renewable energy expansion.

That’s where renewable energy standards can come in to While Colorado’s largest utility, Xcel Energy, has exceeded play. The basic principle is similar to a fundamental concept in its goals, it has stayed within the 2 percent cap set by the financial planning — build a diverse investment strategy that legislature. In fact, despite Xcel making the major capital can weather changes. Renewable energy standards introduce investments in its Colorado system, the average residential diversity by lowering market barriers and creating an open- electricity bill has failed to keep up with inflation over the ing for renewable technologies that have different attributes last five years. and risk profiles than traditional fuels. Colorado’s experience Colorado’s renewable energy standards proof is in shows that this approach has led to impressive results. the pudding. We have a much more diverse, robust, In six years, Colorado has diversified its electricity mix and modern energy portfolio. We have seen significant economic built a thriving renewable energy industry while maintaining development. We have kept costs reasonable. What else stable electricity bills. We have seen the cost of renewable energy could you want? credits for large photovoltaic solar projects decline by 75 per- Matt Baker is a commissioner with the Colorado Public cent, and wind in Colorado is now a least-cost energy resource. Utility Commission.

INNOVATION IN THE ELECTRICITY MARKET

POINT POINT

44 E N E RGYB I Z November/December 2011

VERIZON TECHNOLOGY

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But it needs a little help to get there. So Verizon is working with partners to build a network—a network of people, technology and ideas. With these partners, Verizon is helping increase awareness of energy consumption among Charlotte office workers. And inspire more efficient energy usage while saving businesses and citizens money. As a result, Charlotte hopes to make its town greener. It’s how the city is joining what’s good for business with what’s good for people. Want to do the same for your community?

Learn more at verizon.com/plus

© 2011 Verizon Wireless.

ENERGY

Quotas Don’t Make Sense JUST PLAIN OLD-FASHIONED BANK ROBBERS? // BY JEFF DAVIS ALMOST 150 YEARS AGO,

[ ]

Jesse James galloped megawatt of electricity they generate during the across the Midwestern plains, robbing banks first 10 years of a project. Plus, they still need rateCOUNTER and trains on his way to becoming a modernpayers to invest billions of dollars more in transday folk legend. Newspapers at the time helped mission they can’t afford. After receiving such cultivate James’ image as a fighter for the comgenerous subsidies, if they still need laws enacted mon man because, despite robbing several trains, he seldom that force people to buy their product, maybe it’s time to targeted train passengers, preferring instead to target the find a better investment. safe in the baggage car. Jesse James may only be a Renewables are definitely a part of America’s energy memory, but the larceny in his heart future, but we need to stay out of the business of picking may best be exemplified by devel- winners and losers by dictating the resources consumers have opers out there pushing renewable to buy as well as the geographic locations for those resources. portfolio standards.

Such policies may have advanced the respective technoloMasked as crusaders for the envi- gies, but at the same time they have perpetuated an inefronment, these developers convince ficient market. unsuspecting environmentalists to Even greater, long-term costs of renewable portfolio stanride along with them to state capi- dards may be the impairment of integrated resource plantals all across the country where they ning as well as the erosion of such fundamental consumer deliver an ultimatum to policymak- rights such as “beneficiary-pays” and “least-cost analysis.” ers. “Make utilities and their customA truly sustainable generation and transmission sysers give us their money, give us new electric transmission tem not only must be more diverse, it must be affordable. lines for free, give us all the tax incentives we can carry, or Meeting our country’s future energy needs will require havelse.” They may not wear cowboy hats or carry guns, but ing every energy resource at our disposal, renewable and make no mistake — you better hold on to your wallet when nonrenewable alike. Every option has to be on the table, these modern-day bandits come riding into town. and none should be excluded. Yet, excluding everyone The RPS movement tweaks its message from state to state but themselves is precisely the goal of the RPS supporters. to appeal to its audience, but the goal remains the same. What Perhaps even more telling is that while these modern-day supporters really want are quotas for new wind and solar proj- folk heroes like to talk about renewables as the ecological ects at the exclusion of every other technology in the mar- answer, their projects — unlike hydro or nuclear plants — ket, so they can put money in the hands of the few billionaire are almost always backed up by fossil-fueled gas plants for investors who spent millions to finance their campaign. reliability purposes.

Without a shot being fired, the RPS crowd has convinced In the end, policymakers and ratepayers need to recogstate legislatures, regulators and voters to obligate future gen- nize RPS policies for what they are: old-fashioned quotas. By erations of customers to buy tens of billions of dollars worth impeding the development of the free market and demandof electric generation and new transmission lines over the ing ratepayers buy their electricity, unsuspecting supporters next 20 to 30 years. The costs are staggering, but the impact have only perfected the process made famous by the James will really hit in another five to 10 years when the standards gang and their success has reaped billions of dollars for an ratchet up and these new generation and transmission proj- industry that still can’t support itself. The time has come to ects start appearing in customers’ bills. put an end to the holdups.

The renewables developers already receive between $25 Jeff Davis is a commissioner on the Missouri Public to $30 per megawatt-hour in federal tax incentives for every Service Commission.

POINT POINT

46 E N E RGYB I Z November/December 2011

The Information Challenges of Renewables SOFTWARE BUILDING BLOCKS NEEDED // BY PAUL KORZENIOWSKI ACROSS THE NATION,

energy providers are forging ahead with various initiatives to increase the volume of renewable energy flowing over their networks, and these programs are changing the energy mix. Market research firm The NPD Group found that renewable energy has already become a more popular option than nuclear energy, and wind power will triple from 2011 to 2017, according to market research firm Pike Research.

As utilities alter their energy mix, ripple effects have emerged. “One area where more work is needed is the development of tools to manage the flow of renewable energy into the grid,” stated Don Furman, senior vice president for external affairs at Iberdrola Renewables in Portland, Ore.

A variety of new applications are emerging to bridge this gap. The tools are in an early stage of development, so additional work is needed, but they are eventually expected to be as robust as the systems developed though the years for oil and gas distribution.

One reason why new tools are needed is that renewables introduce more complexity into the energy delivery system. “With renewables, the energy source may fluctuate dramatically during the day,” said Jeff Meyers, director of smart grid sales at Telvent, an IT solutions and information provider. “Since this was not the case with traditional energy sources, we need to develop new tools to monitor and control the fluctuations.”

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energybiz.com E N E RGYB I Z 47

A number of companies are stepping up to fill the void.

Operation Technology based in Irvine, Calif., developed an enterprise power management solution used by utilities in more than 100 countries. The latest release has a renewable focus. The software includes a photovoltaic solar array module that supports solar farm modeling, so suppliers can calculate energy delivery.

In addition, the firm’s wind turbine generator software is capable of modeling wind turbine generators, either individually or in groups.

Furthermore, the wind farm software simulates transient wind conditions with ramp, gust and noise disturbances and calculates their impact on wind generation.

The Colorado Green Wind Power Project, a joint venture of Iberdrola Renewables and Shell WindEnergy, has deployed the module to capture and record wind farm operating data. The solution detects possible threats by determining the source of potential problems and advises on corrective actions to avoid power delivery interruptions.

Founded in 1989, WindLogics, which is now a subsidiary of NextEra Energy Resources, operates more than 9,000 wind turbines for more than 250 customers. The company developed tools so its consultants can monitor wind farm assets and production profiles to ensure that wind equipment operates at peak efficiency. The supplier claims that its forecasting tool has one of the industry’s highest accuracy rates in real-time production forecasting.

Another company, SeaRoc Group, which is located in Brighton, England, offers the SeaPlanner suite of wind farm management solutions. The product line, which has been used mainly in European offshore wind farms, includes a spatial database for GIS data, document management features and personnel management functions, such as automated personnel tracking systems using swipe cards.

GridPoint, which is based in Arlington, Va., developed Energy Manager, a cloud-based software platform built to complement existing hardware and service offerings.

Cloud computing is becoming popular because it offloads maintenance responsibilities from energy companies to third parties. Energy Manager offers a dashboard so customers can more easily consolidate and evaluate energy information.

Gridpoint, which has been in business since 2003, states

... we need to develop new tools to monitor and control the fluctuations.

48 E N E RGYB I Z November/December 2011

that its software features energy diagnostic tools, control algorithms and comprehensive analytics.

Founded in 2007, LanMesh Wireless, which is based in Vaughan, Ontario, Canada, sells the Smart Energy Management software that collects data from solar electrical components. Its tools can collect usage and performance data from wind farms and solar energy systems.

Movement toward renewables is clear. The U.S. Energy Information Administration found that renewable energy sources accounted for about 4 percent of national energy sources in 2010. The industry would like to increase that number to double digits. The continuing maturation of energy management solutions will be needed to reach that goal.

Profiting from Solar LOOK TO THE LONG-TERM VALUE // BY MARC VAN GERVEN NOW MORE THAN EVER,

electric utilities need to be able to accurately evaluate the long-term return on investment in solar energy. Utilities are currently planning large investments in solar generation that will, by some estimates, double annual solar energy capacity in the United States through 2015. Though solar component costs are falling, the concern among utility decision-makers remains: Can an investment in a large-scale solar power generation project deliver a predictable and valuable return over the lifetime of a plant?

Until relatively recently, the solar energy industry has been too immature and the technology too new to accurately predict the return on an investment.

This led to the acceptance of simple, levelized, cost-of-energy models to evaluate the cost of solar projects.

On its own, these models attempt to look at energy output using initial cost and future anticipated costs as the “knowns.” But that prediction falls short of a guaranteed return over the life of a project, since traditional photovoltaic players only offer a warranty under standard labtested conditions. The return described by these calculations is essentially a snapshot in time, but investors in solar energy projects are looking for returns over time, not a snapshot. Systems deployed in the field must perform in a dynamic environment that ranges from suboptimal to ideal.

When a system does not perform as advertised, the model is shown for what it is, a forecast of the anticipated return.

Without a guarantee of system performance behind it, the model alone does not provide purchasers and financers the comfort level necessary to invest.

If the industry is to mature, it needs a performance model that can offer investors confidence and predictability in their ROI. In order to achieve this confidence, a new model must do more than merely offer performance expectations; it must assure system performance in the same way a coal plant would.

Attempting to assure a return on an entire system is rarely done in today’s marketplace. Most solar players lack the longevity, breadth of innovation, vertical integration

and field experience of solutions in real-world conditions to know precisely how their equipment performs and what energy yield it can reasonably assure. This leads to a patchwork of warranties in which each company involved in the project can cover its portion of the system based on standard lab-tested conditions.

This collection of warranties does not allow for anything like the assurance of an energy output over time. Only players with integrated systems experience can wrap or bundle their offerings based on the real-world experience of product performance. With a project-level perspective, an experienced integratedsystem developer possesses a thorough knowledge of fieldtested system performance down to the level of the module and even the cell.

This breadth and depth of knowledge delivers the data needed to offer true performance guarantees.

If anything, today’s solar energy market is still evolving and a measure of component cost is not the same as the measure of value delivered.

An artifact from an earlier stage of the market lifecycle, cost per watt-peak and simple models addressed a need at a time when grid parity was first being discussed, offering a preliminary financial model to evaluate solar projects. As with any investment, technology cost alone should not be the deciding factor. As the solar market matures, it will adopt new ways to evaluate technology-purchasing decisions, looking beyond components to the entire value chain of a project. Whether or not a solar project gets off the ground should be determined not only by the cost of the technology in the moment, but also by the value it is expected to deliver over time.

Can an investment in a large-scale solar power generation project deliver a predictable and valuable return?

Marc van Gerven is managing director of Q-Cells North America.

energybiz.com E N E RGYB I Z 49

Today’s

Utility

Executive...

Premier Partner:

Presented and Produced by:

Faced with regulatory uncertainty, innovative new technologies, cyber security threats, agile new competition and financial uncertainty, the role of today’s utility executive is more complex than ever before.

The future of utility leadership requires translating vision into reality amid disruption.

New this year: sessions specifically for Chief Executive Officers, Chief Risk Officers, Chief Information Officers and Chief Financial Officers, including: • CRO Perspective: How can utilities best protect vital financial interests and guard against risks – anticipated or unanticipated?

• CIO Perspective: “Analytics” represents information. What new analytics tactics are emerging?

• CFO Perspective: How will you raise capital and build renewables when governments can’t offer subsidies for green technologies?

• Plus, the popular CEO panel session returns: managing your utility through disruption Lay the foundation to lead your organization into a productive, profitable future.

...Today’s

Utility

Conference

Harnessing Disruption: Navigating Risk and Opportunities

Register online now at www.EnergyBizForum.com March 19-21, 2012, Washington, DC Ritz-Carlton, Pentagon City

» TECHNOLOGY FRONTIER Solar Paint SPRAY-ON ELECTRICITY // BY SALVATORE SALAMONE IF SEVERAL NEW technology developments prove out, one day utilities, commercial building owners and homeowners may be able to spray a solar paint onto a surface such as a building’s roof or glass windows to convert the sun’s rays into electricity.

Long envisioned as a way to cut the cost of solar cells, researchers have looked for materials that could be sprayed onto different surfaces to produce electricity. The general idea is to have a material that, once applied to a surface, would dry to form interconnected, microscopic solar cells.

Nanotechnology is at the core of today’s efforts to develop what many refer to as solar paint. Some recent developments have advanced the technology and provide a glimpse into the potential benefits solar paint might one day deliver.

A National Science Foundation-funded effort at the University of California-Berkeley is working with nanocrystals based on copper, indium, gallium and selenide. Researchers at the university are making small particles of this material that can be dispersed in a solvent, creating ink or paint that generates electricity when exposed to the sun.

Many of the national labs are also working on solar paint. For example, the National Renewable Energy Laboratory is developing a silicon-based solar ink.

And researchers from the University of Toronto, the King Abdullah University of Science and Technology in Saudi Arabia, and Pennsylvania State University have created a solar cell based on what is called colloidal quantum dots. These dots are nanoscale semiconductors whose electronic characteristics can be varied by changing the size and shape of the individual crystals.

Solar cells based on this work have been among the most efficient ever developed.

Gatherings// Technology Frontier Dec. 5-7

Nuclear Energy Asia

Hong Kong

Dec. 6-9

Clean Coal China

Bejing

For more information about these and other events, please visit www.energycentral.com/events.

52 E N E RGYB I Z November/December 2011

Solar cells based on solar paint will likely offer a trade-off in performance versus cost. Solar-paintbased cells are expected to have fairly low solar conversion efficiency rates, perhaps in the single-digit range at best. Currently, the highest touted efficiency rates for small experimental samples are in the 6 percent range.

Some in the industry believe that solar paint technology can be improved over time. Current thinking is that the cells would have to have efficiencies above 10 percent to FROM COAL be suitable for commercialization. That is TO SORGHUM still significantly lower than today’s best A California project will photovoltaic cells, which deliver in the low be converted to burn sorghum with a high to mid-20 percent efficiency. heat content instead However, the trade-off is that a solarof coal and petroleum coke, according to a paint-based approach will offer cost report in the Bakersfield savings in several areas, thus making them Californian. a viable alternative in some deployment situations. Many of the solar paint technologies being developed today would offer lower manufacturing costs. The materials could theoretically be applied under more common conditions such as at room temperature in an ordinary facility. This would yield a much lower cost than using clean rooms and silicon fabrication facilities, as are needed to produce the current generation of photovoltaic solar cells.

The expected flexibility afforded by spraying a paint- or ink-like substance on a surface offers other potential benefits. For example, the ability to apply the material to a variety of surfaces will enable things like roll-up solar panels, which could potentially offer much larger surface areas for collection. Additionally, if the solar paint approach allows application to common building surfaces, that would open up the technology to much larger arrays like a panel covering the entire side or roof of a building.

Unfortunately, solar paint also has several potential obstacles to success.

Nanotechnology-based solar cell approaches have been under development for nearly a decade with little movement from the lab to production environments.

Solar paints might also be rejected for use based on the potential health risks of nanoparticles.

Facts Trump Rhetoric NUCLEAR LESSONS FROM A TROUBLED YEAR // BY JAMES WALTHER THIS HAS BEEN THE YEAR of nuclear news with earthquakes, tsunamis, floods, tornados and one week in the United States with both an earthquake and a hurricane.

Can nuclear survive these operational and safety tests globally? And in the United States? The answer is definitely yes.

Can nuclear overcome the public perception concerns? Yes, if we work together with the right tools.

Facts trump rhetoric, knowledge overcomes fear, and nuclear energy perceptions can once again climb to pre-Fukushima high levels of acceptance with the American public.

Nuclear events have given a clear signal that the industry-wide support for national education efforts is needed. It is critical to tell the nuclear story.

National Nuclear Science Week, three years old, is a new way for Americans to “Get To Know Nuclear,” the theme of the week. It will be celebrated Jan. 23–27, 2012. The goal is to build recognition of the broad impact of the nuclear industry. The week focuses on the contributions that nuclear science has made to our nation, from the plethora of safe and high-wage jobs to the human stories of medical marvels created by the technology of harnessing the atom.

The National Museum of Nuclear Science & History in Albuquerque, N.M., developed the weeklong celebration in 2010 in order to advance education, stimulate participation and generate communication that provides insight and visibility for the achievements of the nuclear sciences. This is accomplished through partnerships with government, industry and academia.

Nuclear science is incorporating stunning new technologies every year. The newest developments in the fourth-generation nuclear reactor or small modular reactors are innovations that will change the nuclear electricity generation landscape. Likewise, advances in nuclear medicine and molecular imaging are leading to remarkable breakthroughs in patient care. In the United States alone, more than 20 million patients

benefit each year from nuclear medicine and molecular imaging procedures used to diagnose and treat a wide variety of diseases, including heart disease, Alzheimer’s disease and many cancers.

The future energy mix of the country must include a significant portion of nuclear power as a continuing source of non-carbon-emitting baseline energy.

Despite challenges to the industry, many voices are still calling for the deployment of next-generation power plant technology so that nuclear power continues to provide efficient and safe supplies of energy — a commonsense approach to the dramatic energy needs of the future.

Estimates stand at about a 25 percent increase in demand of domestic electricity supplies needed by 2035. With nuclear in the energy mix, the United States will be less dependent on foreign sources of energy and gain all the carbon-free benefits so needed.

And nuclear power means jobs. According to the U.S. Bureau of Labor Statistics, job opportunities in the nuclear electricity generating segment are expected to be excellent because of the large number of retiring workers who must be replaced, an increased demand for electricity, and recent legislation that paves the way for new nuclear energy plant construction.

“Get to Know Nuclear 2012” will be in science classrooms in January. That is our aim as we NEW RESEARCH CENTER work with valued partners like The University of the National Science Teachers Maryland will open an Energy Research Center Association as part of our to focus on alternative national coalition of partners. energy and energy storage, according to the The week will affect an estimated Associated Press. It will 20,000 students in communities be part of the school of engineering. across the country.

Resources for the week, including curriculum materials, a classroom presentation and much more can be found at www.nuclearscienceweek.org.

James Walther is director of the National Museum of Nuclear Science & History. energybiz.com E N E RGYB I Z 53

» TECHNOLOGY FRONTIER Making a Business from Smart Meter Data THE MAGIC OF PEER PRESSURE // BY SALVATORE SALAMONE THE OLD ADAGE, “You can lead a horse to water …” seems to apply to utility customers with respect to their use of smart meter information and their actions to more prudently use energy.

If managers believe their utilities can simply install smart meters and customers will automatically change the way they use energy, the findings of a 2011 IBM consumer study provide eye-opening evidence to the contrary. In total, 10,000 people in 17 countries were surveyed, and IBM found a startling lack of knowledge. “Thirty percent didn’t understand the basics of their energy bill,” said Michael Valocchi, vice president of IBM Global Business Services.

The report on the study’s results contends that this lack of understanding leads to decision-making processes that depend on the evaluations of trusted advisers, rather than on understanding the clear choices made available to a customer by the smart grid and smart meters.

In many cases, educating customers and giving them the information they need requires the use of a middleman — a company that sits between the customer and the utility. The role of the third party is to help manage the large volume of data collected by smart meters, analyze the data to produce useful analytics about usage trends and correlations of usage with other factors, and present the information and findings to customers in an easy-to-understand way.

Certainly, utilities could do this work themselves.

However, they would need the staffing and expertise to perform the nuanced analysis, integrate the data into their existing systems, correlate the findings with other data, and present the information to the customer through, for example, a personalized Web portal.

For help, utilities are relying on software vendors such as IBM, Oracle, SAS Software, SAP and others, whose products are currently used in their back office operations. Or, they are turning to third parties that bring an added dimension to address these challenges.

One example of this middleman role is an ongoing effort between IBM and the Republic of Malta’s 54 E N E RGYB I Z November/December 2011

government-owned utility. The joint project found that deploying smart meters needed to be coupled with new presentations in billing that focus on the concrete steps to be taken to improve conservation.

This falls in line with the findings of the IBM survey, which found that customers, in general, and younger customers, in particular, were much more inclined to change usage based on the consensual decisions of their social circle of friends rather than on the traditional financial motivations being offered by energy providers. Thus, utilities must find ways to tap into that social aspect of customer decision-making.

To that end, IBM helped create an online smart energy portal that explains conservation in easy-tounderstand terms and that provides the tools for measuring a customer’s progress in energy savings compared with their peers’ progress.

Focusing on the social aspect of customer decision-making is the forte of Opower, another one of the middleman companies. Opower has teamed with roughly 60 utilities, including eight of the 10 largest in the United States. It has access to data from more than 40 million smart and traditional meters, and it delivers information to more than 10 million customers in North America.

Like IBM, Opower marries smart meter data with other information and then uses advanced analytics to develop customized messages for consumers. For example, using statistiSOLAR CELL cal algorithms and multivariable regression INNOVATION analysis that combines energy usage, A transparent conductor made of carbon housing and weather data, Opower estinanotubes could be mates the amount of heating and cooling affordable and flexible, according to a report by energy used by each household without UPI. The properties of the need for an in-house monitoring device. the new material could allow solar cells to be Thus, instead of learning that a household incorporated into fabric, used 10 percent more energy overall than researchers said. their neighbors, customers can discover that they specifically used 30 percent more energy on heating, and therefore may need furnace maintenance or new insulation, or may need to set their thermostats to a lower temperature.

» METRICS TELECOM SPENDING CLIMBS Utility Telecom Spending Despite the soft economy, utility spending on telecommunications equipment and services is expected to reach $3.2 billion this year, up 3 percent from last year and 21 percent from two years ago, according to the Utilities Telecom Council.

One-third of the utility spending on telecom this year is tied to two-way metering, according to the study.

3.2

$

2011

3.1

$

2010

2.

$

20096

BILLIONS

Source: Utilities Telecom Council

Wirelesss communications spending by utilities is expected to amount to 28 percent of the total this year – and as much as 50 percent of the total in 2016, the council reported.

ONGOING ENERGY SLUMP U.S. Energy Consumption Total energy usage in the United States is expected to remain below 2007 and 2008 for this year and next, according to the latest projections by the U.S. Energy Information Administration. Last year, consumption was below levels of 2007 and 2008. Energy usage fell 5 percent in 2009 compared to 2008. Energy use in 2007 reached the highest level in more than three decades.

A prolonged economic downturn has cut into energy sales, curbing utility revenues. This year, Americans will use an estimated 98.4 quadrillion million British thermal units of energy. One quadrillion British thermal units equals 172 million barrels of oil or the amount of energy consumed by 10 million households, according to Jonathan Cogan, with EIA.

95 90 Quadrillion BTUs

2007

2008

2009

2010

2011

2012

Source: US Energy Information Administration

100

energybiz.com E N E RGYB I Z 55

» LEGAL ARENA Energy Gridlock in Congress THERE IS STILL HOPE // BY RUSS CHOMA

[INSIDE]

THE PAST THREE YEARS “One could argue that without under the Obama administration really smart strategy and advocacy, the have seen a lot of disappointment for PTC is in serious jeopardy, but I don’t WASHINGTON supporters of renewable energy and think anyone should sign the death climate policy, and in an honest assesswarrant,” he said. ment of how renewable energy and climate change It’s not the perfect mechanism for driving the policy will fare over the next year, it still looks pretty renewable energy industry, but it’s been a somewhat grim. Besides the stimulus, a few pro-green policies reliable one through the years. have slipped through, but advocates saw the door Luckily, renewables have a fairly powerful friend slammed hard on a comprehensive energy and when it comes to tax credits — the industry that climate bill in 2009, and the conversation in invests in them. Most renewable companies sell off Washington has seemed pretty dead since. their earned tax credits to big financial firms who But in any honest assessment of where renewables have big profits and big taxes to pay. Wall Street and climate stand right now, and looking forward for may be loathed by Main Street right now, but it the next year, it’s not all grim. Even with Washington has deep pockets and its reps in Washington can enamored with talk of the so-called “super committee,” often be seen fighting for tax credits for renewables. a bipartisan panel spanning both houses that intends Big financial firms aren’t allies whose names will to find at least $1.2 trillion in budget cuts, green isn’t be uttered in public for awhile, but their support totally out in the cold. and pull on both sides of the aisle shouldn’t To get a sense of what is and isn’t possible in be discounted.

Washington over the next several months, I talked New spending on anything is going to be a tough to Stephen Ward, who worked as chief of staff for sell and there will be program cuts, but those are Sen. Jeff Bingaman, D-N.M., from 2003 until early going to happen across the board. Industries that August of this year. Fresh from the inside, heading are ready to fight to keep their incentives have a shot up the staff of one of the green crowd’s best friends at it, Ward said. in Congress, Ward told me that writing off help from “Some programs are going to get hit, everything Washington as a lost cause because of partisan is on the table, that’s the rules of this,” Ward said. gridlock and anti-spending “Having said that, we’re not cutting all federal spendattitudes ignores the reality of ing. There will be winners and losers — my hope is what can be accomplished in that this industry is sufficiently sophisticated and can EPA CHIEF the coming months. make appropriate and effective arguments across DEFENDS RULES The Section 1603 cash all the spectrums.”

Lisa Jackson, the administrator of the grants, which have been a boon The Democrats simply don’t have the firepower to U.S. Environmental to the renewables industry and push anything through on their own. The Senate’s Protection Agency, said planned power plant which will keep pumping out energy and natural resources committee, which emissions rules would cash for months, are set to Ward’s old boss Bingaman still chairs, has been not cause blackouts, according to a report in expire on Dec. 31. Don’t hold one of the few bastions of bipartisanship in the last the Houston Chronicle. your breath for them being few years. But just because the committee turns out Power plants will be free to choose how to renewed, Ward said, but the pro-clean-energy bills — as they have already this meet the emissions production tax credit , which term — doesn’t mean they’ll make it off the floor of the standards, she said. rewards companies with a Senate, or through the House of Representatives, 2.1 cent tax credit for every kilowatt-hour of renewable where conservative Tea Party Republicans have manenergy they create, is very much on the table. aged to hold outsized influence over more traditional But it won’t stay there by itself.

Republicans who might be inclined to help.

56 E N E RGYB I Z November/December 2011

Renewables have traditionally suffered from the fact that they are most viable in remote rural areas — the best places to harvest wind and solar are frequently far from the places that actually consume the most energy — but Ward said this is what might give renewables a fighting chance in the next year. Many Republicans represent rural districts — if the message gets out that clean energy means local jobs, there will be bipartisan support, Ward said.

But, it’s important to temper expectations, he added. The all-inclusive climate and energy bills that died in the House and Senate in 2009 — when Democrats still held large majorities — did so because they tried to do too much, and a lot of good initiatives went down with the ship, Ward said.

“We could and should have passed a renewable electricity standard when we had the opportunity, but the clock ran out on that because we were focused on whether we could pass a broad bill on containing carbon,” Ward said. “I would argue that the whole effort suffered from folks wanting to do it all, and so it was sort of an all or nothing. They let the perfect be the enemy of the good.”

Clean energy supporters shouldn’t check out of the process now because of unhappiness with how little has gotten done in the previous three years, or disgust with how tied up Washington seems to be right now.

“Incremental” will describe the process of getting support for clean energy, Ward said.

New Jersey Forges an Energy Policy KEEP RATEPAYERS HAPPY // BY RICHARD KORMAN WHEN A TAX- AND BUDGET-CUTTING Republican like New Jersey Gov. Chris Christie throws a wrench into his region’s competitive wholesale electricity market, it says something about how state-level interests trump conservative ideas.

It also says something about the market obstacles to creating an electrical energy system where lowcost, green electricity goes anywhere we want it – a vision emphasized by President Barack Obama when he took office.

Weary of waiting for the incentives in a regional wholesale electricity market to deliver more reliable, less costly power, New Jersey lawmakers, Christie and the state’s Bureau of Public Utilities have opted to provide their own incentives for new in-state plants and the jobs that go with it.

They are subsidizing development of three natural-gas-fired plants in Old Bridge, Woodbridge and Newark by requiring local distribution companies to enter into long-term purchase contracts with the new plant owners. The conservative The Weekly Standard has taken Christie to task for planning to mess up the market, describing his energy policies as “not so conservative.” Power suppliers have sued to stop the plan.

New Jersey imports about half its electricity, most of it from Pennsylvania and Ohio.

As of June 2010, New Jersey residents were paying 15.86 cents per kilowatt-hour, compared with 13.33 cents and 12 cents in coal-rich Pennsylvania and Ohio. Capacity charges cost New Jersey ratepayers about $1.5 billion a year, according to state officials. energybiz.com E N E RGYB I Z 57

» LEGAL ARENA

The president of the state’s Board of Public Utilities, Lee Solomon, has raised the prospect of exiting PJM Interconnection, the regional transmission operator for all three states and parts of 10 others, as a last resort.

“Our position is that the market is not truly competitive and functioning,” said Kenneth Sheehan, the BPU’s chief counsel. “The level of subsidies and the way the market is functioning is not providing capacity and reliability we need commensurate with what other states are paying.”

Low load-growth projections in the poor economy and painfully slow approvals for new transmission lines promise that little will change soon.

So in March, the state used its powers under its new Long-Term Capacity Agreement Pilot Program to designate the Hess Newark Energy Project, the NRG Old Bridge Clean Energy Center and CPV Woodbridge Energy Center to receive long-term purchase agreements with local distribution companies. The combined-cycle plants are designed to have generating capacities of 625 to 664 megawatts.

Gatherings//Legal Eagle Dec. 14-15

Wind Resources & Project Energy Assessment

For more information about these and other events, please visit www.energycentral.com/events.

58 E N E RGYB I Z November/December 2011

Seattle

Under LCAPP’s terms, the selected generators have to bid their new capacity into the PJM interstate wholesale capacity auction.

Power producers in the PJM Interconnection have sued in federal court in Newark to block the planned long-term contracts. They claim the new capacity could be bid below the market price “no matter how low that market price may be, and regardless of the actual costs of the new capacity,” according to their complaint.

“What the legislature did was subsidize TVA HEAD chosen generators with guaranteed payREJECTS BLAME ments into the PJM capacity markets,” said Tom Kilgore, the president of the Glen Thomas, president of PJM Power TVA, said that his Providers Group. The payments provide the organization was not to blame for a major three selected companies “with guaranteed 2008 coal ash spill even revenue streams while everyone else has though it is responsible for the safe operation to compete,” Thomas said, and that “was of its facilities, according incredibly destructive.” to the Knoxville News-Sentinel.

As to why New Jersey hasn’t seen any new plants developed, Thomas suggested regulatory uncertainty and the LCAPP programs itself may play a role.

Even PJM officials have admitted that reserve capacity is thinning and that they are frustrated with how recession has cut demand. But PJM officials have also argued that capacity is being added, just not in New Jersey. Also, PJM has agreed to comply with a Federal Energy Regulatory Commission ruling requiring PJM to tweak its minimum offer price rule for electricity capacity auctions to prevent the three LCAPP power producers from undercutting other power producers by failing to reflect construction costs in their minimum offer prices.

What can result from all this, warned Frank Felder, director of the Center for Energy, Economics and Environmental Policy at Rutgers University, is a mixed approach to electricity markets that is neither completely market-driven nor completely governmentplanned. “And then you run the risk of not being able to figure out what to do next,” he said.

Altogether, the situation in New Jersey seems to prove again the statement attributed to former New Mexico Sen. Pete Domenici. Energy policy depends less on whether you are a Republican or Democrat than whether you are a buyer or seller.

Put another way, keeping ratepayer-voters happy can overshadow political ideology, even if you are a conservative Republican.

Smart Grid Backlash DEALING WITH AN ILLINOIS VETO // BY DARRELL DELAMAIDE PRESIDENT BARACK OBAMA may be a big backer of smart grid technology, but top officials of his adopted home state, Illinois, put the kibosh on an ambitious program in September when Gov. Pat Quinn vetoed legislation authorizing Commonwealth Edison to change its rate structure as part of a deployment of smart grid technology.

“I want to make it clear to the public that they should not be gouged by something they don’t feel is providing better service,” Quinn said, in vetoing the legislation. Illinois Attorney General Lisa Madigan called the ComEdison plan “legalized pickpocketing.”

ComEd expressed its “disappointment” at the setback and began lobbying efforts to override the governor’s veto. But the Illinois example is the latest evidence of a growing consumer backlash in the deployment of smart grid technology.

In California and Texas, two states that have already widely deployed smart meters, there are complaints that the smart meters don’t work and that electricity rates have risen, not decreased as promised.

Part of the problem, said Colin Rowan at the Pecan Project in Austin, Texas, is that the benefits of smart grid technology have not been well articulated, and consumers see only the costs.

“Utilities are not well-known to be customerfocused; they don’t need to be,” Rowan said. “If you’re going to have a revolution, you should invite the consumer.”

Texas utility Oncor, for instance, ran GREAT LAKES into consumer backlash and a lawsuit last WIND REJECTED year when it simply informed consumers The New York Power Authority has rejected the smart meter had been installed and plans to build a wind customers became enraged when their farm off the shores of Lake Erie and Lake bills subsequently went up.

Ontario, according The Pecan Project is a five-year demonto the Buffalo News.

The agency said it stration program funded by stimulus money cost too much and from the U.S. Department of Energy. In required subsidies. the initial phase, researchers are mapping patterns of use in an Austin neighborhood as a prelude to seeing what could give consumers an incentive to adopt the technology.

“Consumers aren’t going to say, ‘I want a smart meter,’” Rowan said. “You have to show them some

magic in the living room.” The Pecan Project has enlisted the help of Sony, Best Buy and other consumer electronics experts to help figure out what will capture the imagination of consumers.

Illinois officials certainly didn’t see any magic in smart meters. Quinn balked at the prospect that a customer paying $82 a month for electricity was going to see $3 added on each month for 10 years, even though ComEd claimed consumers would save at least that much by having more control over their electricity consumption.

Of course it didn’t help that John Rowe, chief executive of ComEd parent Exelon, in a March appearance seemed to cast aspersions on smart grid technology on the very day utility president Anne Pramaggiore was telling Springfield lawmakers how beneficial it could be.

“Smart grid we are reluctant to embrace, because it costs too much and we’re not sure what good it will do,” Rowe told an audience at the American Enterprise Institute in Washington, according to press reports at the time. He went on to say that given a choice between investing in smart grid technology and installing old-fashioned cable, he’d probably “bet on the cable.”

In California, consumers complained of much higher rates after smart meters were installed, and a class action suit was launched in 2009 by Bakersfield consumers claiming their bills had tripled. Pacific Gas and Electric said the higher charges were due to a much hotter summer. Separately, the utility was embarrassed when it emerged that hundreds of meters throughout the state had malfunctioned and charged customers for phantom power.

Electricity customers in Maine raised another objection. After Central Maine Power outfitted nearly onethird of its households with smart meters, customers complained that radio frequency emissions from the new meters were making them sick. The state’s Public Utility Commission quickly created an opt-out provision but further incensed customers by making them pay extra to keep analog meters.

The backlash in these early-adopter states is giving other states pause in moving forward on the technology. energybiz.com E N E RGYB I Z 59

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» FINAL TAKE From Soap to Energy GETTING CONSUMER FRIENDLY // BY ROBERT A. MCDONALD WHAT CAN THE HIGH-TECH electric utility industry learn from a 174-year-old soap company?

This is a question that has prompted electric industry leaders to reach out to consumer product companies like Procter & Gamble.

These leaders are facing a tough challenge. They have EDITOR’S NOTE: Robert A. McDonald technology — the will deliver a keynote so-called “smart grid” address, “Connecting — that offers compelwith Consumers,” at the GridWise Alliance ling benefits: It drives conference in Washington economic competitiveon November 10. He has ness, provides energy provided EnergyBiz with an overview of some of the security for our nation, themes he will be exploring. is better for the environment, and shifts power away from electric companies into the hands of consumers who have more control over their daily energy needs. What’s not to like?

And yet, consumer adoption of this new technology has been painfully slow. Consumers are fairly passive about their energy needs — the only times they get involved are when costs go up or service goes out.

The question I’m asked by my electric industry peers is, “What are we doing wrong? Why is it so hard to sell a technology that has so many transparently valuable benefits?”

The answer, from my vantage point, is this: a clear and overarching purpose. A purpose like P&G’s — to touch and improve lives — inspires deep empathy for those we serve and want to serve. When we focus on purpose and serving people, we gain a deeper understanding about their whole lives and give them what they want to make their everyday life better.

We all occasionally fall into the trap of knowing more about the technologies we invent than about the people who use them. This is usually a prescription for marketplace failure. Successful innovation requires a deep understanding of consumers’ lives, dreams, frustrations and aspirations. This level of understand62 E N E RGYB I Z November/December 2011

ing breeds insights that, in turn, inspire innovation that improves lives.

It’s hard, time-consuming, hands-on work. At P&G, we interact directly with more than 5 million consumers a year — in their homes, in stores, on the phone, online, in focus groups and in our labs. We observe, listen, engage and learn.

We’re not there necessarily to have them tell us what they need from a company like ours; they usually can’t tell us because most customers lack the industry perspective to understand what’s possible.

It’s sort of like asking people in the 19th century what they needed to improve transportation; most would have said, “a faster horse.”

Henry Ford understood that the solution was an affordable automobile. That’s the sort of unarticulated need we seek to understand.

When we dig beneath the surface of consumer comments and behaviors, we discover insights that not only inspire the innovations we create but also tell us how to communicate the benefits of innovation in ways that drive consumer awareness, trial and repurchase. For example, when we watched people struggle with the burdensome chore of lugging around mops and pails to clean floors, we discovered an entirely different solution — our Swiffer floor cleaning system, which requires no mops, water or pails.

So, my advice to the electric utility industry is to get off the grid and into people’s homes. Understand the role that energy plays in day-to-day lives. Understand frustrations with energy services and aspirations that a

... get off the grid and into people’s homes.

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» FINAL TAKE smarter grid could help people achieve. The opportunities to improve lives through grid modernization may be well beyond the role that the industry plays in everyday life today, requiring a fuller immersion by companies in the lives of their customers.

There is no substitute for immersion. It’s not possible to discover insights that lead to big ideas by reading reports, demographic charts or focus group summaries. To develop empathy requires connecting with people as people — not as energy consumers, but as moms and dads, kids and college students, newly retired parents and aging grandparents. By understanding how people live every day, it’s possible to discover the insights that lead to consumer-centric innovation and big ideas that invite consumer participation in the smart grid.

At the end of the day, it all boils down to one simple question: What is the electric utility industry’s purpose? Is it to provide affordable, reliable energy? Yes, but I suspect it’s more than that.

My encouragement is to embrace a higher-level purpose: improving people’s lives with the power of energy. It all starts there.

Robert A. McDonald is chairman of the board, president and chief executive officer of Procter & Gamble.

» ADVERTISER INDEX Company

Page

URL

Alcatel-Lucent

17

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The Boeing Company

9

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BP Solar

13

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Day & Zimmermann

21

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Elster

inside front cover

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EnergyBiz

63

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50–51

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General Physics

7

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ICF International

47

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Itron

3

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Kema

1

www.smartgridsherpa.com

Opower

29

www.opower.com

Oracle

outside back cover

oracle.com/goto/utilities

Pike

25

www.pike.com

Quintel

40–41

www.quintelmc.com

Sensus

5

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Transmissions Hub

inside back cover

www.transmissionhub.com/trial

Utility Analytics Institute Summit 2012

60–61

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Utility Analytics Institute

39

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Verizon

45

verizon.com/plus

64 E N E RGYB I Z November/December 2011

STATEMENT OF OWNERSHIP MANAGEMENT AND CIRCULATION (Required by 39 U.S.C. 3685) 1.

2.

3.

4.

5.

6.

7.

Title of publication: ENERGYBIZ. Publication No.: 0023-934.

Date of filing: September 30, 2011.

Frequency of issue: Bi-Monthly.

No. of issues published annually: 6.

Annual subscription price: Not Applicable.

Complete mailing address of known office of publication (not printer): Energy Central, 2821 S Parker Rd., Suite 1105, Aurora, CO 80014. Contact Person: Kristin Prosowski, 303-228-4746.

8. Complete mailing address of headquarters or general business office of publisher (not printer): 2821 S Parker Rd., Suite 1105, Aurora, CO 80014.

9. Full names and complete mailing addresses of publisher, editor and managing editor: Publisher: Mark Johnson, 2821 S Parker Rd., Suite 1105, Aurora, CO 80014. Editor: Martin Rosenberg, 8121 W 99th St., Overland Park, KS 66212. Managing Editor: Not Applicable.

10. Owner (Do not leave blank. If the publication is owned by a corporation, give the name and address of the corporation immediately followed by the names and addresses of all stockholders owning or holding 1 percent or more of the total amount of stock. If not owned by a corporation give the names and addresses of the individual owners. If owned by a partnership or other unincorporated firm, give its name and address as well as those of each individual owner. If the publication is published by a nonprofit organization, give its name and address.): Steve Drazga, 2821 S Parker Rd., Suite 1105, Aurora, CO 80014, Mark Johnson, 2821 S Parker Rd., Suite 1105, Aurora, CO 80014, Martin Hohmann, Kirchhertener Strasse 22, 52445 Titz, Deutschland.

11. Known bondholders, mortgages and other security holders owning or holding 1 percent or more of total amount of bonds, mortgages or other securities: None.

12. Tax Status (For completion by nonprofit organizations authorized to mail at nonprofit rates) Check one: The purpose, function and nonprofit status of this organization and the exempt status for federal income tax purposes: Has Not Changed During Preceding 12 Months.

13. Publication Title: ENERGYBIZ. 14. Issue date for circulation data below: Sept/Oct 2011.

15. Extent and nature of circulation: A. Total no. copies (Net press run): Average no. copies each issue during preceding 12 months, 22,197.

Actual no. copies of single issue published nearest to filing date, 22,617.

B. Legitimate Paid and/or requested distribution (by mail and outside the mail.): 1. Outside County Paid/requested mail subscriptions stated on form 3541. (Include direct written request from recipient, telemarketing, and internet requests from recipient, paid subscriptions including nominal rate subscriptions, advertiser’s proof and exchange copies): Average no. copies each issue during preceding 12 months, 17,579. Actual no. copies of single issue published nearest to filing date, 18,411.

2. In-County Paid/requested mail subscriptions stated on form 3541. (Include direct written request from recipient, telemarketing, and internet requests from recipient, paid subscriptions including nominal rate subscriptions, advertiser’s proof and exchange copies):Average no. copies each issue during preceding 12 months, Not applicable. Actual no. copies of single issue published nearest to filing date, Not applicable.

3. Sales through dealers and carriers, street vendors, counter sales and other paid or requested distribution outside the USPS: Average no. copies each issue during preceding 12 months, Not applicable. Actual no. copies of single issue published nearest to filing date, Not applicable.

4. Requested Copies Distributed by Other Mail Classes Through the USPS (e.g. First Class Mail): Average no. copies each issue during preceding 12 months, Not applicable. Actual no. copies of single issue published nearest to filing date, Not applicable.

C. Total paid and/or requested circulation (Sum of 15b(1), (2), (3), and (4)): Average no. copies each issue during preceding 12 months, 17,579. Actual no. copies of single issue published nearest to filing date, 18,411.

D. Nonrequested distribution (by mail and outside the mail): 1. Outside County Nonrequested copies stated on Form 3541 (include sample copies, requests over 3 years old, requests induced by a premiuim, bulk sales and requests including Association requests, names obtained from Business Directories, lists and other sources: Average no. copies each issue during preceding 12 months, 2,991. Actual no. copies of single issue published nearest to filing date, 2,644.

2. In-County Nonrequested copies stated on Form 3541 (include sample copies, requests over 3 years old, requests induced by a premiuim, bulk sales and requests including Association requests, names obtained from Business Directories, lists and other sources: Average no. copies each issue during preceding 12 months, Not Applicable. Actual no. copies of single issue published nearest to filing date, Not Applicable.

3. Nonrequested copies distributed through the USPS by other classes of mail (e.g first-class mail, non-requestor copies mailed in excess of 10% limit mailed at standard mail or package service rates): Average no. copies each issue during preceding 12 months, Not Applicable. Actual no. copies of single issue published nearest to filing date, Not Applicable.

3. Nonrequested copies distributed outside the mail (include pickup stands, trade shows, showrooms and other sources): Average no. copies each issue during preceding 12 months, 1,397. Actual no. copies of single issue published nearest to filing date, 1,303.

4. Total Nonrequested Distribution (Sum of 15d (1), (2) and (3): Average no. copies each issue during preceding 12 months, 4,388. Actual no. copies of single issue published nearest to filing date, 3,947.

F. Total distribution (Sum of 15C and 15E): Average no. copies each issue during preceding 12 months, 21,967. Actual no. copies of single issue published nearest to filing date, 22,358.

G. Copies not distributed: Average no. copies each issue during preceding 12 months, 230. Actual no. copies of single issue published nearest to filing date, 259.

H. Total (Sum of 15f and g): Average no. copies each issue during preceding 12 months, 22,197. Actual no. copies of single issue published nearest to filing date, 22,617.

I. Percent paid and/or requested circulation (15C divided by f times 100): Average no. copies each issue during preceding 12 months, 80%. Actual no. copies of single issue published nearest to filing date, 82%.

16. Publication of Statement of Ownership is required and will be printed in the Nov/Dec 2011 issue of this publication.

17. Signature and Title of Editor, Publisher or Business Manager,or Owner: Steve Drazga, CEO, Date: September 29, 2011.

I certify that all information furnished on this form is true and complete. I understand that anyone who furnishes false or misleading information on this form or who omits material or information requested on the form may be subject to criminal sanctions (including fines and imprisonment) and/or civil sanctions (including civil penalties).

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