EnergyBiz MarApr 2013

OGE’S PETER B. DELANEY

VOLUME 10 // ISSUE 2 MARCH 13 // APRIL 13 energybizmag.com

PEOPLE // ISSUES // STRATEGY // TECHNOLOGY

Sandy’s Lessons CFOs DEALING WITH COMPLEXITY JAPAN’S GRID FOCUS

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MARCH/APRIL 2013

8

30

12 Features

12

SANDY’S LESSONS A massive storm produced an epic outage across the Northeast. Utilities, regulators and officials have been intent on learning from what worked and what didn’t. They are already moving to build a more resilient energy grid.

16 Reliability in the Spotlight 17 New Jersey Solar Unscathed

38 Departments O U R TA K E

4 The Power of Our EnergyBiz Family 6 Letters BUSINESS EDGE

8 Utility-Scale Solar 10 Convergence

22 Dealing with Increasing Complexity

Utility chief financial officers must figure out the future of federal fiscal and tax policy – and what it will mean for their enterprises. At the same time, they are on the front lines of major capital spending, dealing with pensions and strategizing on rates.

28 Japan’s Grid Focus

After Fukushima and the loss of nuclear assets, Japan has focused like few others on putting in place the most intelligent of grids. What are the implications of the Asian nation’s leadership in energy efficiency?

T E C H N O LO GY F R O N T I E R

30 Simulating and Stimulating Renewables

33 Nesting INTRODUCING

38 Empowering the Customer/ OGE’s Peter B. Delaney LEGAL ARENA

42 Paying for Security F I N A L TA K E Vol. 10, No. 2. Copyright 2013 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 March/April 2013

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» OUR TAKE The Power of Our EnergyBiz Family SEE YOU AT THE ENERGYBIZ LEADERSHIP FORUM

THE ELECTRIC POWER BUSINESS is economically vast and consequential. Those who labor in it want to be more effective in executing their responsibilities and advancing their careers.

I have crafted each issue of EnergyBiz for more than eight years, striving to create a journal worthy of those who read each issue.

March 18-19, many of us will convene in Washington at The National Press Club for our fifth annual EnergyBiz Leadership Forum. The theme this year is “Strategies for a Radically New Utility Universe.”

All of our forums have dealt with disruptive threats — and the challenges and opportunities they present.

Many of the utility industry chief executive officers who have spoken at our forum over the years have graciously advised me on the topics they would like to see covered at our upcoming event.

One CEO this summer told me that the industry has to now focus on creating new business opportunities that utilize new smart grid technologies. A second said that few are exploring what enhanced cyber security will cost and how the costs will be covered.

One executive called our attention to fascinating smart grid initiatives now under way in Asia.

Another suggested that we need to know more about how operations, customer information and telecommunications technology can be integrated.

We will be looking at all of this, and more, when we convene in Washington.

Past attendees have told us that they know of no other event that is both small enough to allow for meaningful networking and large enough to attract consistently stellar speakers.

One West Coast state utility regulator went out of his way to tell us that our Leadership Forum is one of the best events he attends each year. The same goes for the top executive of a public power utility in Ohio who has been to all our forums.

So what is the value of the EnergyBiz community?

The strength and reputation of our community has allowed me to ask Jeanne Fox, the New Jersey regulator, to provide us with an essay on Hurricane Sandy, in this issue.

Our community also made it possible for me to ask Sen. Byron Dorgan to help us enlist Gen. Jim Jones to keynote our forum. The general, President Barack Obama’s former national security adviser, will deliver a A Preview of major address on energy the EnergyBiz and national security in Leadership the 21st century.

Forum Recently, I met with March 18-19 Gregory Reed, an associwww.energybizforum.com ate professor of engineering on the campus of the University of Pittsburgh, to discuss the work his school is doing along with other universities and energy companies to shape the future of power. He said that as a longtime loyal reader of EnergyBiz, he was thrilled to respond to our invitation to pen the Final Take pages of this issue.

Fox, Dorgan and Reed exemplify the far-reaching and ever-growing influence of the EnergyBiz community. Obviously, so do you.

Please consider the program we have orchestrated for you in Washington later this month, and if possible, join us. [Visit www.energybizforum.com] As in all communities, the more you put into it, the more we are all enriched.

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

4 E N E RGYB I Z March/April 2013

» LETTERS Dear Readers and

Advertisers:

Medal in the ine has won a Gold t EnergyBiz magaz ring for publishing tha rd nee wo ngi es/e you h iliti wit /ut re energy I am pleased to sha eight-year history. n in the category of its itio in pet es tim com s six ard or that top hon prestigious Eddie Aw rgyBiz has received Ene 2.

201 in e the best full issu dal awarded a Silver Me In addition, it was 2– lumn or Blog in 201 for Best Online Co tions. o-business publica among all business-t /Rosenberg]. [www.energybiz.com 2 Silver tion received the 201 Earlier, the publica from the American nce elle exc ial tor medal for edi s.

Publication Editor Society of Business n our ’s launch, it has bee Since the magazine aralleled insights and unp e vid pro to on visi ble electric power perspectives to ena plex, rk better in a com professionals to wo firm . These awards con fast-changing world mission. we are fulfilling our

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I appreciated your editorial column, “A Fresh Start,” in the January/February issue of EnergyBiz. I hope you’re right about the prospects for folks in Congress to overcome their “doesn’t play well with others” habit and pass sensible energy policies that benefit consumers and the industry.

Interesting edition of the magazine, as always. You’re off to a good start on the new year.

Dick Johnson Johnson Strategic Communications Overland Park, Kan.

I read with interest your article, “The Cyber Security Balancing Act,” in the January/February issue.

The systems that help electric utilities make, manage and move power are being targeted and sometimes breached by cyber attackers. The now infamous Stuxnet used USB drives to infil6 E N E RGYB I Z March/April 2013

trate and infect its targets, and the same approach is being used on electric utilities’ industrial control systems. This rapidly growing threat vector is not mitigated by the traditional approach called “air gapping.” The solution? Much like airports screen passengers before every flight, USB drives need to be screened for malware prior to every use. It’s not expensive, it’s not hard, and it works.

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CORRECTION Due to an error by guest opinion writer Ra Dong-Chae’s translator, the amount of money KEPCO has invested in its Jeju Island smart grid project was incorrectly reported in the January/February issue.

The correct amount is $226 million.

To contribute to the Letters column, please email your submission to editor@energybiz.com.

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» BUSINESS EDGE

Utility-scale Solar READY FOR PRIME TIME // BY AL SENIA AFTER YEARS OF FITS AND STARTS, utility-scale solar-generated power is finally poised to emerge from the shadows, propelled by a combination of technology breakthroughs, state renewable energy mandates and lucrative federal and state grants and tax incentives, according to many industry observers. This year promises to be a breakthrough one for solar generation, with a number of large projects coming on line.

“Solar generation is growing a lot,” said Dennis McGinn, president and chief executive of the American Council on Renewable Energy (ACORE). “It is now one of the most rapidly growing parts of the nation’s renewable energy portfolio. The price is coming down, and there is a lot more confidence within the investor community based on solar’s performance. The cost of (investment) capital is now more competitive.”

A number of significant utility-scale photovoltaic and concentrating solar power (CSP) projects are generating significant amounts of power this year, promising to catapult solar generation into the mainstream. These include Arizona’s Agua Caliente (280 megawatt) and Solana (250 megawatt) solar projects, Nevada’s Crescent Dunes (110 megawatt) generating station and California’s three-unit Ivanpah (400 megawatt) project, which will utilize 170,000 mirrors to generate electricity.

“The next three years are going to be very active,” said Mike Taylor, director of research for the Solar Electric Power Association. “We are seeing a lot of projects being put in place.”

Many of these utility-scale solar projects are located in the western desert regions and often involve large-scale projects and important technology breakthroughs. As an example, the $2.2 billion Ivanpah project, being built by BrightSource Energy on 3,300 acres of California desert land near the Nevada border, will eventually utilize more than 170,000 mirrors to reflect the sun’s power into boilers located in three different 400-foot towers, heating water to produce steam to drive turbines. The plant is expected to produce about 400 megawatts by the end of this year. Such a design has never operated on such a 8 E N E RGYB I Z March/April 2013

large scale, but the project has attracted well-known investors such as Google and NRG Energy.

Many of the large-scale CSP projects are being aided by cash grants that provide renewable-energy developers with up to 30 percent of a project’s cost once it is completed. Offered as part of the 2009 economic stimulus package, the cash grants now have been replaced with tax credits of equal value.

According to a report in the Los Angeles Times, Ivanpah’s BrightSource investors will receive an estimated $600 million in federal grants once the project ramps up, and other corporate investors could receive $600 to $700 million in tax breaks over a five-year period.

Such incentives on a variety of solar projects guarantee investors solid returns, reduce capital costs and help attract Wall Street interest.

“The tax benefits have been essential and very helpful,” said ACORE’s McGinn. “They increased the attractiveness of solar because of the reduced costs.

They led to increasing solar development and greater confidence.” McGinn added that confidence in utilityscale solar projects also is growing because developers are taking a more professional approach to such projects. “There is more predictability, and they are taking more of a systems engineering approach, eliminating uncertainty and applying IT and sensor technology to provide real-time information.”

Michael Eckhart, global head of environmental finance for Citigroup, said the solar-generation industry, especially its photovoltaic segment, is benefitting from both the financial incentives and global trends.

“Photovoltaics has its major U.S. incentive in place through 2016, so the industry has the certainty that it always wants,” he noted. “I believe the solar PV industry just recently passed the bottom of the valley.

Demand in China will pick up very rapidly in 2013 and 2014 as the new policy regime sets in, growing to 15 to 30 gigawatts per year. This will have positive spillover effects in the U.S. as well.”

In fact, smaller photovoltaic generating projects have started to dominate the utility-scale solargenerating project landscape because costs have dropped dramatically and the technology is less risky

Imagine delivering a customer experience that’s consistent, rewarding and unique for every Construction workers at the Agua Caliente solar plant, the largest PV plant operating in the world. Photo courtesy of First Solar

customer you serve. Invite them to interact with you using the communications channel they

to implement, according to SEPA’s Taylor. “Photovoltaic is seeing continued growth on the utility side of the market. The prices of photovoltaic panels are very, very low.” As a result, PV generation has become less expensive than CSP generation, Taylor said.

“We are seeing a niche of 10 megawatt to 50 megawatt PV projects going on line very rapidly. These projects have a smaller footprint, can be developed more rapidly and can be deployed faster. The sweet spot is really the medium-size photovoltaic project,” Taylor said.

In fact, SEPA anticipates seven PV projects totaling 2,024 megawatts to begin operating this year, mostly involving the major California utilities such as Southern California Edison, Pacific Gas & Electric and San Diego Gas & Electric, NO REGRETS all of which face strict state renewable enJim Rogers, the head of ergy mandates during the next few years.

Duke Energy, said that the bruising $32 billion Another seven PV projects are expected in merger with Progress 2014. On the other hand, SEPA anticiEnergy was worth it, despite the fact that pates only Ivanpah’s three units and two the deal spawned two other CSP projects generating a combined state investigations that were settled late last total of 752 megawatts to come on line year, according to The this year. And just two new CSP projects, Charlotte Observer. both in California, are anticipated next year.

“I think the baby is going to be beautiful,” “You are going to start seeing CSP Rogers said. projects being put in in smaller amounts,” said Taylor. “What is CSP’s path forward? Can they work to reduce costs? There are some real open questions.” We are not seeing a lot of new CSP projects because of the higher cost compared with photovoltaic technology, he said.

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» BUSINESS EDGE

Convergence KNITTING TOGETHER OPERATIONS, INFORMATION AND TELECOM // BY THOMAS F. ARMISTEAD

THE FUTURE HAS ARRIVED. The longheralded convergence of information technology and operations technology is transforming electric utilities and their relations with customers. It is improving situational awareness, increasing efficiency and driving unprecedented speed in responding to outages and emergency situations. “We’ve all been talking about convergence coming for years, and it’s pretty much upon us,” said Jeffrey Nichols, director of information security and information management at San Diego Gas & Electric. “We’re not really talking about the future anymore. We’re talking about what we are doing today.”

The industry is going through a blending of telecom and operations technology under one roof, said Connie Durcsak, president and CEO of the Utilities Telecom Council, in Washington. The smart grid is a communication network, and there is also a machineto-machine network, with machines sharing data with other machines. “It’s having a transformational impact on telecom networks,” she JAPAN WIND said. It’s enabling utilities Developers plan to to perform teleprotection, construct 143 turbines 10 miles off the coast capturing the read from a of Fukushima, meter, for example, and proaccording to UPI. viding real-time situational The project is believed to be the world’s largest awareness to heal and offshore wind farm restore the network when and will generate 1,000 megawatts. an outage occurs.

The growth of distributed generation by rooftop solar cells and the rise of independent power production using wind and solar technologies have greatly complicated grid operation, making the capabilities of the new networks indispensable.

“We’re going from a clockwork, one-way, tightly engineered energy-delivery system and an ICT (information and communications technology) system that supports that to an intermittent or sporadic N-way energy-delivery system that supports rooftop cellular, 10 E N E RGYB I Z March/April 2013

The flow of data from integrated information and operation technology with telecom gives utility operators flexible control over their systems. Photo courtesy of SDG&E

that supports solar and wind, that supports all kinds of different power producers that will generate intermittently,” said Nichols. “Every single thing that we’ve learned in the past about information technology and operation technology will have to be brought to bear to keep our transmission and distribution system stable when we get this renewable and sporadic generation on the grid at scale.”

Advanced metering infrastructure, another component of this system, allows a utility to acquire consumption data, or it can prompt the utility to tell the customer if the customer has an outage, said Durcsak.

The flow of data from integrated information and operation technology with telecom gives utility operators flexible control over their systems. Photo courtesy of SDG&E

SDG&E has experienced getting an outage alert from the smart grid before calls come in. “That is a game-changer,” said Nichols.

In Dallas, Oncor has had that same experience.

“We have gotten to the point now that we will roll a truck based upon the meter effectively calling us, and not wait on that customer to call us,” said Michael Quinn, Oncor’s chief technology officer.

But Oncor found even more: A team dispatched to an outage alert would find the lights still on, so they concluded the meter data was not any good. Further investigation revealed that the meter was actually flagging a power-quality problem. For a residential customer, a power-quality problem can manifest as a momentary outage, similar to a circuit-breaker or recloser operation. Line crews investigating the power-quality problem found connectors at the transformer that served a group of houses had come loose. The meter was flagging repetitive voltage dips that signaled a system weakness before it became serious. “It gives the utility some insight into how they may want to take that information and feed that into their maintenance practices,” Quinn said. It enables the utility to optimize the timing and nature of the response.

This incident illustrates the benefits of the integrated system for Quinn. “Absent that meter-level data and the network to get it back, it would be rare that you would find these types of issues until you had just a complete failure of that connection point,” he said.

In achieving this degree of integration, distributed computing was a game-changer because it placed computing power in utility assets and meters to acquire data on their operations, Durcsak said.

Wired and wireless communications transmitted the data to the utility for analysis and response.

“The main challenge is always leading people through any changes that are required,” said Nichols. “In the people-process-technology triad, the people part of that is always the toughest and takes the most time.”

Gatherings//Business Edge March 18-19

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Dallas

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

energybiz.com E N E RGYB I Z 11

Utilities and providers who invested in smart grid technology had smart meters to help provide more detailed information about outages.

12  E N E RGYB I Z  March/April 2013

Sandy’s Lessons

Preparing for the Next Mega-Outage

By Salvatore Salamone on electrical power systems was widespread and in many areas extensive.

The key to many restoration efforts was information.

Beyond using basic information about the extent of outages derived from traditional sources, some utilities and grid operations were able to get more granular and more detailed information about specific problems by using some relatively new technologies. This included using mobile devices in the field to more accurately assess damage and leveraging data from smart grid systems in order to better understand the geographical extent of outages.

Coming on the heels of tropical storm Irene in August 2011 and the devastating October 2011 snowstorm, some power companies in the Northeast had already started using THE IMPACT OF HURRICANE SANDY

new systems to help deal with the aftermath of major storms.

But more needs to be done because most industry experts believe the United States will experience more of these major storms and other power grid-impacting natural disasters, such as large forest fires from lingering drought conditions in parts of the country.

So what were the lessons learned from Sandy that will help going forward?

“Utilities and providers who invested in smart grid technology had smart meters to help provide more detailed information about outages and some also had more sophisticated monitoring and control capabilities of transmission and generation equipment in their grids,” said Chris Dunn, a partner in Booz & Company’s energy, chemicals and utilities practice.

energybiz.com E N E RGYB I Z 13

SA NDY ’S LESSONS

Sandy damage in Queens, NY. Photo by Jim Henderson

Some of the most useful information for assessing the scope of outages came from smart meters. Traditionally, customers would call their utility to report an outage. Often there is a delay between an outage and the time when a customer calls. This gives utilities incomplete and perhaps inaccurate information. Smart meters have the capability to transmit a so-called “last gasp” message after power is off, informing the utility of its state. The information from many smart meters could be assimilated to get a real-time, accurate representation of the scope of an outage.

Some companies used new tools to better assess damages and manage restoration resources. For example, National Grid routinely makes use of a geographic information system to integrate data from multiple systems to aid restoration efforts. For Sandy, the company was able to enhance the usefulness of this system using a newly developed and piloted mobile device capability. Specifically, information from the system could be pushed down to handheld devices in the field, providing timely information to the workers.

Additionally, the workers could collect information and send it back to the company for assessment. At a site with

14 E N E RGYB I Z March/April 2013

downed power lines, a worker would fill out a damage assessment form noting such things as whether there was a wire on the ground, a pole down, a tree on a wire, and other factors that contributed to the problem. The workers could also take photos and send them back to the company for additional assessment.

“This helped us understand what equipment was needed to make the repairs,” said Cheri Warren, National Grid’s vice president of asset management. For example, one site might need a tree cleared while another might need a new pole installed, some sites might need both. The integrated system also helped with planning, prioritization efforts and logistics.

Obviously, utilities and operators can benefit from technology to help with restoration efforts. But there also needs to be more emphasis on preventing disruptions.

A natural place to start is to look at the issues with overhead power lines. The majority of Sandy outages on Long Island and in parts of New Jersey were from downed power lines due to falling trees and branches.

Most utilities have, and many are required to have, vegetationmanagement plans. In the past, these were mostly manually maintained plans. More recently, there has been a move to employ more easy-to-use geographic information systems that offer integration with other systems. The systems have long been used by utilities and oil and gas companies for operational planning and asset management. Increasingly, transmission system operators and utilities are turning to this software for vegetation management. Used in this manner, companies marry systems maps, aerial photographs of their rights of way, and data about the location of vegetation. The com-

This helped us understand what equipment was needed to make the repairs.

bined information is then used to plan tree pruning and removal efforts.

Other measures being discussed are the use of stronger poles to avoid the impact of flooding and winds. There is also discussion about installing more water barriers at substations in areas that in the past were not subjected to flooding, but perhaps could be with major storms in the future.

In the future, utilities might make use of other technologies that are currently under development.

Aerial surveillance from remotely controlled, unmanned flying machines will likely play a larger role in collecting data before and after a disaster. Several industry labs, universities and government agencies have been testing drones designed for civilian applications and small helicopters to be used to fly over areas to collect information about storm damage.

Such systems would provide timely details about downed poles and lines. They might also be of use before a storm to get accurate and timely information about vegetation growth. With such information, a utility or operator could spot potential problems and trim vegetation from power lines that might be in danger during a storm.

Given the growing importance of mobile devices to collect and relay information about storm damage, a more exotic technology is being developed by the Electric Power Research Institute. The institute has created a prototype mobile device application, dubbed Field Force Data Visualization, to assist workers in the field when they are assessing damages. The application uses utility-provided information about the location and type of equipment in the field and the GPS capability of a mobile device. When a worker points the device at, for example, a pole, he sees an augmented reality view of the scene depicting what kind of pole, crossbar, transformer and wire are present. With the application, the worker can simply click on a part that needs to be replaced. That information is then transmitted to a central source where it can be used by outage-management and work-management systems. With tight integration of these systems, automation might be possible where, once the

The U.S. Army clearing trees. Photo courtesy of the U.S. Army

information is transmitted, parts can be loaded onto a truck and sent to the specific location to repair the damage.

Another approach that is being explored is how to leverage information from social media sites to better understand the scope of an outage. GE demonstrated an example of this technology by overlaying Twitter and Facebook posts about power problems or outages onto a map of a power company’s electrical network. Medical researchers have used a similar approach, looking for the instances of people searching for or mentioning things related to the flu, for example, to track the progress of an outbreak. For regions where no smart meters are installed, the GE approach has the potential to let utilities see customer outages much faster than relying on people calling in to report a problem.

These more exotic technologies need more development work. However, they squarely fit into the realm of solutions needed to deal with future storms and natural disasters. The benefits derived from the technologies used in Sandy’s aftermath should serve as an incentive to make more wide-scale use of them to reduce the impact of future storms, minimize the damage done and speed restoration efforts.

energybiz.com E N E RGYB I Z 15

SA NDY ’S LESSONS

Reliability in the Spotlight NE XT UP – SEEK IMPROV EMENTS

BY RALPH LaROSSA

SAFE, RELIABLE ENERGY is fundamental to everything our

industry has accomplished during the last 100 years in ensuring that the lights stay on, homes remain comfortable and our customers have the power they need to get on with their lives. Now, with Super Storm Sandy, this essential reliability role has come into sharper focus for the broader public, not only in states such as New Jersey through which the storm cut its destructive path, but from coast to coast.

As New Jersey’s oldest and largest utility, we at PSE&G have long believed that reliability is a key to economic vibrancy – indeed, a major selling point to businesses choosing to locate in our home state. We have backed that belief with a strong commitment of resources over the years. In 2011, PSE&G invested $1.3 billion in upgrades to electric and gas transmission and distribution infrastructure, and we are moving ahead with $5 billion in additional system upgrades over three years.

These projects are being done to ensure reliability, but they also provide opportunities for many businesses and create thousands of jobs.

Although we are proud of our track record from a reliability standpoint, we recognize that Sandy requires a lot of re-thinking in order to make our systems more resilient and sustainable. We have dealt with daunting storms many times before, but Sandy’s destruction exceeded them all.

We serve hundreds of communities and every one of them had significant outages, and our own facilities experienced substantial damage.

During restoration, we performed some type of tree trimming or removal work on 48,000 trees and replaced or repaired 2,400 utility poles. We made 2.1 million electric service restorations in a two-week period – a record for any American utility.

16 E N E RGYB I Z March/April 2013

It took a true team effort to tackle the monumental task that Mother Nature laid before us, with exemplary leadership provided in our state by Gov. Chris Christie. We were able to bring the power and heat safely back to customers as effectively as we did thanks not only to the heroic efforts of our workforce, but also to invaluable assistance from many fellow utilities and 4,000 workers who came to our aid from 24 other states and Canada.

Sandy – and the increased frequency of extreme weather events – may now define a new normal. All the conclusions won’t emerge in one day. But it’s clear that we will need to continue strengthening our infrastructure to ensure safe, reliable energy for our customers long into the future.

A wide range of options will need to be examined – from ways to build more redundancy and resiliency into our system, to the use of other two-way communication tools, to revisiting our tree-trimming practices.

This hardly exhausts the list of possible improvements worth exploring.

Many of the options to be considered will involve significant investments. This will require a candid discussion with all stakeholders, homeowners, businesses from the local mom-and-pop to the Fortune 500, and public officials, to come to a consensus on what we are willing to invest and how quickly we can rebound when storms like this hit our state.

I think we all agree that just restoring the system to what we had before is no longer adequate. Therefore, we need to work together to be sure we understand the benefits, and costs, of an electric system for the future.

PSE&G welcomes this discussion and remains as dedicated as ever to serving the state of New Jersey.

Sandy may now define a new normal.

Ralph LaRossa is president and chief operating officer of PSE&G.

New Jersey coastal damage. Photo by Master Sgt. Mark C. Olsen, courtesy of the U.S. Air Force,

New Jersey Solar Unscathed GETTING MOR E R ESILIENT IN STOR MS

BY JEANNE M. FOX

on October 29, Hurricane Sandy slammed directly into the New Jersey coastline near Atlantic City.

Sandy’s 90-mile-per-hour winds also coincided with a full moon and high tides. Over 2.7 million, or 68 percent, of New Jersey electric utility customers were without power at the peak of this storm. As a result of Sandy, there were approximately 9,000 downed utility poles and 116,000 fallen trees. Thousands of homes and businesses were destroyed, refineries were shut down and 70 percent of gas stations were offline. As a state, we mourn these losses and have come together to rebuild.

AT APPROXIMATELY 8 P.M.

Sandy also impacted the operations of solar and highlighted the fact that solar, as currently designed, does not operate if grid power is down.

In 2001, there were only six solar projects for a total of 9 kilowatts in New Jersey.

These six facilities produced approximately 10,800 kilowatt-hours of electricity per year. At the end of 2012, there were almost 19,000 solar installations across New Jersey for almost 1 gigawat of solar capacity, which generated over 1 percent of the electricity used in the state. Today, there are almost 5,000 projects in various stages of installation energybiz.com E N E RGYB I Z 17

SA NDY ’S LESSONS

Solar can be designed to operate as a part of a storm emergency response solution with two system changes. One is through use of an inverter that senses the grid power is offline and switches the solar to isolate the photovoltaic system. This isolation needs to include a transfer of critical loads within the building. The switching, which is what happens when an emergency diesel generator comes online, is a little more difficult with solar because of the variability of the solar generation. This transfer has to be able to match critical loads to account for the variable generation of solar.

The other way solar can operate following a storm is through an onsite storage system, since the grid is no longer the storage system. Currently, this storage is in batteries onsite, but the onsite batteries only have to support the critical loads and not the full building load. In the future, within a smarter grid, this may be improved through community storage or distributive storage.

There continue to be advances in the area of off-grid solar. New Jersey has invested in companies that design and build these types of systems. One is Princeton Power Systems in Lawrenceville, N.J. The Board of Public Utilities and our Economic Development Authority have funded the growth of this clean-energy company since 2005. Princeton Power designs and builds inverters that can operate as grid tie systems, but more importantly as off-grid systems. They have designed and operated several solar systems that can be isolated from the grid to operate when the grid is down.

New Jersey is currently evaluating other systems that can operate in a storm-response mode when the grid is down.

Solar with storage could be included in that mix. Designing solar for off-grid with storage is currently more expensive than the standard design. When viewed in retrospect after a hurricane, however, this redesign could add significant value.

One of the keys to advancing off-grid solar in a stormresponse mode is smart grid. Smart grid is more than just installing advanced meters at homes or businesses. Smart grid is enhancing the intelligence of the distribution grid to be able to improve its ability to add innovative technologies such as storm-responsive distributive generation. A smarter grid can make storm-responsive photovoltaics possible and improve the grid’s reliability during an emergency.

After Sandy, there were no reports of massive panel damage.

for almost 740,000 additional kilowatts of solar capacity in the pipeline.

After Hurricane Irene there were no reports of any significant solar panel damage. Likewise after Sandy, while there was damage to some projects, there were no reports of massive panel damage. Even some panels that were on buildings that were destroyed by the storm survived intact. The 1 gigawatt of installed solar did not assist in the aftermath of the storm, but a change in design could address this issue.

When grid power to a home is down, the solar inverter senses the loss and shuts down the system. This happens by design and is required by code. Most solar systems are not designed to operate independently of grid power. The distribution grid under net metering acts as the storage component for the system. When the solar generator does not use the solar electricity, it is virtually stored on the distribution grid to be used later. When the sun goes down, the solar generator gets back the solar electricity that was stored on the distribution grid. The solar generator’s electricity is not really stored on the grid, but under net metering the grid functions like storage for the generator. This standard design works well, except when a majority of the grid power is out from a storm. The solar generator loses the ability to store solar electricity.

18 E N E RGYB I Z March/April 2013

Jeanne M. Fox is a commissioner with the New Jersey Board of Public Utilities.

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Dealing with

INCREASING COMPLEXITY FROM TA X POLICY TO CAPITAL E XPENDITUR ES

UTILITIES CONTINUE TO HAVE MASSIVE INVESTMENTS

to fund. The future of taxes

is a front-burner issue in Congress. These are but two of the issues complicating the jobs of utility chief financial officers.

To better understand the unique challenges to utilities in 2013, EnergyBiz recently sat down with CFOs to discuss the outlook for their companies and the industry. Their edited comments follow.

22 E N E RGYB I Z March/April 2013

ENERGYBIZ What are the main financial issues your utility faces?

tional deficit, the failure to invest in our schools and the next generation.

ENERGYBIZ Where do you think we are going on Our businesses in Hawaii are finding themselves in a very strong economy. Our unemployment rate is 5.7 per- federal taxation of dividends in the future? cent. Our visitor industry is strong. Military spending is up.

SOMMA There is a concern on the taxes on dividends. I’d As a consequence we see on the macro level, utilities finance like it to be the same rate as capital gains. You can make themselves well in low interest rate markets. Also, we own a the theoretical economic argument that if local community bank that accounts for a rates go up to a top rate of 42 or 43 percent PARTICIPANTS third of our income. Banks don’t make a lot that will hurt folks on fixed income, which of money in low interest rate environments.

James Ajello is most of our retail shareholders. As far as AJELLO

In Idaho, we see some really good signs. The state government has taken steps to balance the budget. The governor and the legislature have taken proactive steps in managing the tax policy. That provides opportunities for businesses. We are the beneficiary of in-migration.

ANDERSON

Executive Vice President, Chief Financial Officer Hawaiian Electric Industries Darrel Anderson Executive Vice President, Chief Financial Officer Idacorp Maria Pope Senior Vice President, Chief Financial Officer Portland General Electric

selling debt, everybody around the table would agree we haven’t had any problem selling very low coupon debt. Talking to bankers and others, there’s some amount of tax increase built into our stock prices and our ability to raise equity. Going to the extreme upper limit is not built in.

Our industry is a yield-driven business, and part of the valuation of our company is driven by our yield. A disparity between capital gains and dividends Tony Somma would have an impact on the valuation of Senior Vice President, Chief Financial Officer our companies. We’re a capital intensive Westar industry, and we have to go out and raise a lot of capital. To increase the cost of that POPE Our area is really benefitting from capital by raising the tax on dividends will some terrific growth in the high-technology area driven affect the cost of capital. Everybody will ultimately end up

by Intel and a number of other companies. We also have paying for it. seen a burst of manufacturers expanding, new data cenSooner or later, the United States has to get its fiscal house in order and stop kicking the can down the road. We need to deal with structural issues like entitlements.

In Kansas, our unemployment runs below the national average by 200 basis points.

Our glass is more half full than half empty.

SOMMA

ters coming in and even a solar company new to the area that’s come in the past year. Nationally, we have deficits in the healthcare area and other areas that are causing a significant drag on the economy, affecting both ourselves and many of our customers. We also worry about the educa-

ANDERSON

AJELLO Our tax burden is closer to 50 percent, because we have a very high state income tax of more than 11 percent. That’s not good for the economy in general. Earnings are taxed twice. They’re taxed at the corporate level and now they’re going to be taxed at a higher rate at the individual rate energybiz.com E N E RGYB I Z 23

DEALING WITH INCREASING COMPLEXIT Y

We’re looking to embark on a $1 billion transmission project.

DARREL ANDERSON

ANDERSON To put it into context, we are a $2 billion market cap company with $5 billion of assets on the balance sheet today. Our ongoing capital spent today is around $200 million to $250 million a year. We’re only recovering about half of the $250 million today in our rates. We’re looking to embark on a $1 billion transmission project with a couple of partners.

We are about $6 billion in assets, and we’re growing a couple percent a year. We have been a leader in renewable energy and smart meters which have been fully deployed throughout our service territory. We’ve lowered our costs and have begun to do a number of innovative programs that benefit customers. Our major capital spending will start once our generation RFP process is complete and plant and transmission construction begin.

POPE

if these proposals go through. I am hoping at least the tax on dividends and capital gains moderates from the very high numbers being discussed at this time. Consider this problem in the context of the need for utilities of all sorts — pipeline companies, water companies, electric utilities, gas-fired utilities — to build out their infrastructure. This comes at a very bad time, because we’re reinvesting money in our businesses at unprecedented levels.

POPE We very much would like to see parity between dividend taxes and capital gains. We believe that to shift the winners and losers in competitive capital markets puts the utility industries at a disadvantage at a time when we need to be making investments for additional reliability, new generation and renewable energy.

ENERGYBIZ Yet demand for power is flat. Does that create a problem when you need to spend rising amounts of money?

Portland General is a uniquely short utility that purchases between 25 percent and 30 percent of our energy on the open market. And for reliability purposes, we need to have more of our own generation to meet customers’ needs going forward.

POPE

What is the level of spending that you anticipate at your utilities?

ENERGYBIZ

24 E N E RGYB I Z March/April 2013

SOMMA At Westar, our capital expenditures for the next three years will total $2.5 billion. We’re a company with a market cap of $3.7 billion. We’ve had a sizable capital expenditure program, mainly for environmental controls on our coal units as well as for transmission investment.

We also have a market cap of about $2.5 billion.

And that’s about the amount of money that we’ll be spending in the next five years. About half of our capital is going to be spent on system maintenance to improve or maintain reliability and the like. Very little of that is being spent on new technologies. We’re up to almost 14 percent renewables right now, and we’ll be at 20 percent before too long. And that’s a more complex, more dynamic grid to operate. So there are smart grid investments that are being made to make the grid more reliable, smarter, more responsive, more dynamic and to accommodate intermittent supply of energies through renewables. This industry in the next 10 years will be investing at unprecedented levels.

AJELLO

We invested $60 million in a new system recently that accomodates unique tariff structures.

JAMES AJELLO

SOMMA But you know people have rate fatigue. We just don’t know how the pendulum is going to swing sometimes.

We as an industry need to be cautious about all this capital that we’re spending. Ultimately, it’s going to be driving up prices for our customers. The regulatory construct is good today, but when does that scale shift? Will the state regulator become a consumer advocate, as opposed to being evenhanded and balanced?

Through 2007, we were growing like gangbusters and we couldn’t keep up with the growth that was happening. Then we saw a downturn in the economy. So there was a little bit of a silver lining there. It did allow us an opportunity to catch up, improving the system so we can accommodate new customer growth.

ANDERSON

POPE We have a number of industries in our area that face stiff competition from others around the world, and we have to remember that their energy prices are very important to their being able to compete globally. This is still a very tough economy, and many of our customers struggle with paying their bills.

Do you foresee any changes in utilities’ business models?

ENERGYBIZ

We invested $60 million in a new system recently that accommodates unique tariff structures, such as new tariffs for electric vehicles and time-of-use rates, and billing programs based on consumer needs that are more sophisticated and responsive than the old systems that are 30 to 40 years old. Smart grid and smart meters all tie in with these new investment programs. We need faster-acting backup generation, given the onslaught of renewables. I don’t see our traditional franchise tariff-based structures changing in the next five or even 10 years. I don’t know that we can do what we’re required to do with a much different business model.

AJELLO

ENERGYBIZ What is the future of M&A in this industry?

POPE In the past couple of years, we’ve actually seen quite a bit more M&A than we have historically seen in this area.

My guesstimate would be that we would continue to see consolidation in the utilities.

SOMMA On M&A, there’s a fallacy that if you’re bigger, you’re better. I don’t think that’s necessarily the case. The hurdles in the industry to do a deal are so high. It takes umpteen months to complete a transaction. Everyone has their own parochial interests, and as soon as the transaction is announced, everybody has their hand out thinking, “Well, if they’re going to do a transaction, there must be money on the table, and I want some of it.”

ANDERSON One of the impediments to consolidation is the underestimation of the impact regulation has on a particular transaction, and the ability to gather back any type of premium that might otherwise be paid. The regulators are going to be asking what’s in it for the customer.

Is unfunded pension obligation a major problem for this industry?

ENERGYBIZ

AJELLO I’d say it is a significant problem. Some of us have different models to treat the issue. We have what’s called a pension tracker so we are immunized from an income standenergybiz.com E N E RGYB I Z 25

DEALING WITH INCREASING COMPLEXIT Y

We’re in a unique period of time with unprecedented uncertainty.

MARIA POPE

decent. It allows us from a P&L standpoint to defer pension costs. We just got our union to recently shift to a cash balance plan to help manage volatility. Going forward, we’re looking at trying to reduce our liability. We’re in the process of cashing out people who have terminated from the company, are vested and not yet drawing retirement benefits just to reduce that liability.

What are some of the hardest aspects of your job that your bosses and your constituents don’t appreciate?

ENERGYBIZ

point. When we pay these benefits, we get it back in electric rates over time. It’s not a perfect mechanism, but it largely immunizes us. Notwithsanding this model, the rating agencies count this as debt. So when they calculate the ratios, there’s no compensating factor for this. Our number is about $450 million. And that is a significant number relative to our market cap.

ENERGYBIZ

That’s unfunded?

AJELLO Yes, but it will be recovered in rates by our mechanisms. However, we just need to come up with cash on a current basis to pay pension and medical benefits in the meantime.

ANDERSON We went through a period of almost 15 years where we weren’t required to fund a pension plan because the markets were doing well. All of a sudden, the markets change. Now, the way the accounting rules work, you have to start putting money in. Customers weren’t paying for it because of the way financial accounting rules were at the time — you didn’t have that expense to go back and collect from the customer. Now you’re required to start funding something you hadn’t had to fund previously. The bottom line is, what is the right benefit package that you need to attract and retain the right folks in your workforce?

At Westar, we have a similar construct for pension that James has at Hawaiian Electric. It’s not great, but it’s SOMMA

26 E N E RGYB I Z March/April 2013

POPE We’re in a unique period of time with unprecedented uncertainty in terms of the capital markets, fiscal policies and environmental policies, on the federal level and the state level. The complexity of managing all of these balls at the same time, while meeting customer needs for low prices and reliable service as well as delivering competitive shareholder returns, makes it a much more difficult, but also much more interesting, time.

ANDERSON The challenge of balancing regulatory fatigue against what we need to be doing for our owners. This might sound a little bit self-serving, but I’m not sure customers appreciate the level of effort that’s put into minimizing the potential rate impacts of certain activities.

AJELLO The complexity of the business keeps on growing. The risks associated with running one of these networks increases with time. The capital required increases over time as well. And customers of our businesses are increasingly demanding very reliable, safe service. At the same time, regulators have to cope with making tradeoffs between reliability and cost recovery and the like. The businesses are getting more difficult to manage with new technologies, greater investments and greater demands for reliability. We need to improve the image of the industry and provide a better understanding of what it takes to operate one of these businesses.

It’s taken for granted.

The lights are always on.

TONY SOMMA

It’s taken for granted. The lights are always on. And look what happens when the lights aren’t on, if there’s a storm or something like that. We want to keep our prices, the value proposition for electricity in Kansas, attractive so that we can attract businesses and the economy will grow. Managing the technical aspects of the business as well as the regulatory and political aspects is a very complex business.

SOMMA

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energybiz.com E N E RGYB I Z 27

JAPAN’S GRID FOCUS

DE ALING W ITH NUCLE AR IMPLOSION

BY RICHARD SCHLESINGER

aftershocks from the devastation of Fukushima will reverberate through Japan for decades. Of the 52 nuclear plants operating before the disaster, only two continue to run, and the consensus is that Japan will not again resort to nuclear generation for the foreseeable future. That puts enormous pressure on utilities to replace lost capacity with other fuel sources and to better manage demand.

Because Japan has always depended on imported fossil fuels, especially liquefied natural gas and oil, there is now a surge in interest in renewables, particularly solar The EnergyBiz and wind. And in order Leadership Forum to manage demand and in Washington integrate intermittent and March 18-19 will distributed generation, explore in detail it is suddenly essential to the smart grid rethink the grid. revolution in Asia.

The challenge is not to www.energybizforum.com improve reliability. The Japanese grid is among the most reliable in the world. If the average American loses power for eight hours a year, the average Japanese endures just five minutes of darkness, according to Matt Wakefield, senior program manager, information and communications technology at EPRI. THE SOCIOLOGICAL AND ECONOMIC

28 E N E RGYB I Z March/April 2013

But the Japanese grid isn’t very smart. Meters, especially residential meters, are still mostly read by meter readers, and while some level of smart metering is deployed, it’s mainly been to establish consumer-to-utility communication to replace these human meter readers. There are a number of pilot projects, but the two-way communication capability that we associate with smart, AMI metering in the United States is at a very early stage of deployment in Japan. The challenge, then, is to deploy the components of a truly smart grid in order to enable integration of intermittent renewable resources and the ability to dynamically manage demand.

The challenge is urgent. With the sudden loss of virtually all of its nuclear generation, a significant amount of total generating capacity disappeared. Estimates range as high as 30 percent, according to the World Nuclear Association, and as low as 13 percent to 18 percent by the Electric Power Research Institute (EPRI), but whatever the absolute figure, the loss is very serious. And while some demand was also lost in the wake of Fukushima, much of the industrial capacity that was destroyed has been rebuilt.

Since the earthquake, Japan has handled the loss of capacity mainly through voluntary usage curtailment. The country’s utilities have always relied on a voluntary program with their industrial customers to reduce usage on an emergency basis, but such requests were rare. During the first summer

after Fukushima, they asked for reductions and demand decreased significantly, according to EPRI’s Wakefield. That says a lot about the ability of utility companies in Japan to communicate with their customers, but it also speaks to what Clyde Prestowitz, the founder and president of the Economic Strategy Institute and a former counselor to the Secretary of Commerce in the Reagan administration, calls Japan’s homogeneity. “Everyone is on the same team and everyone is part of the same village. So they work hard to get electricity to the whole village in a way that simply wouldn’t happen in our society,” Prestowitz said.

But voluntary curtailment of electric usage is a stopgap measure. Lost capacity must be replaced and then keep pace with expected industrial expansion. Although much of the now dormant nuclear capacity is probably safe, restarting those plants is unlikely. There was, naturally, a high level of concern about nuclear energy from the beginning in Japan, but citizens basically trusted the government and utility executives, who championed it. As the facts about the failure to protect against an eventuality like Fukushima emerged, as well as the lack of transparency about the extent of the disaster, that trust was lost, according to Prestowitz. The result is profound ground-level opposition to nuclear power. Because nuclear was seen as the answer to Japan’s long dependence on imported carbon-based fuel, the obvious alternative now is renewable sources, and any move toward greater efficiency and renewable, distributed generation depends on deploying advanced, smart grid technology.

Japan’s former ruling party, which was replaced in December by the center-right Liberal Democratic Party, conducted a wide-ranging re-examination of national energy policies. According to Jeffrey A. Miller, the energy attaché at the U.S. Embassy in Tokyo, a key concern has been to replace nuclear with other fuels, especially renewables. To hasten the move toward renewables, the government enacted a feed-in tariff as an incentive for new investments in solar, wind, biomass, geothermal and small-scale hydroelectric. At the same time, Miller says, Japan is fully committed to creating more agile power grid configurations that enable real-time monitoring, control and demand response capabilities, and distributed power generation and energy storage by way of fuel cells and batteries.

The Japanese plan is very aggressive; the goal for solar alone is 28 gigawatts by 2020 and 53 gigawatts by 2030,

Can they scale the hardware, the network, the software to drive performance of 27 million meters?

with about 80 percent of that being rooftop installations, according to EPRI’s Wakefield. That compares with U.S. solar capacity of about 2 gigawatts today. The goal by 2020 is to produce 20 percent of total capacity with renewables.

The pace at which they want to move creates real challenges, notes Jack Azagury, managing director of smart grid services for Accenture, one of the global firms Japan is working with in its efforts to upgrade the system, and so does the scale involved. “Tepco alone [the utility that serves Tokyo] has 27 million meters. No AMI system operating in the world has that many. So the question is, can they scale the hardware, the network, the software to drive performance of 27 million meters?” said Azagury. He also thinks utilities and the government need to launch an education campaign in order to avoid possible consumer resistance, such as that which has met some smart-meter initiatives in the United States.

While the feed-in tariff is helping support the move to renewables, full smart grid deployment depends to a large extent on being able to make a good business case for the investment in infrastructure and developing smart appliances that could drive down peak and overall consumption.

Azagury believes that sustained, broad consumer acceptance depends on set-it-and-forget-it solutions, because consumers don’t want to interact with their energy provider every day. They want something that is convenient and works and gives them the savings they want. International standards for smart appliances adopted this past December by the Consumer Electronics Association should encourage manufacturers to make more of their appliances smart-grid ready, and the communications technologies to integrate appliances with either a WiFi or cellular system are actually evolving a bit more rapidly than the appliances themselves, says EPRI’s Wakefield. But appliances are long-term investments for most people, so even when smart-grid-enabled appliances are widely available it will take time for them to be deployed.

The twin goals of integrating renewables and managing demand hinge on a smartly upgraded and expanded grid, which requires discipline and serious financial investment. But to flourish today — and tomorrow — depends on meeting the demands of a new energy economy.

Japan has clearly articulated its commitment to greener, cheaper, more efficient energy, and while the new government will no doubt revisit the issue, it’s likely the country will continue to vigorously move forward to implement what is likely to be the most sophisticated national grid in the world. energybiz.com E N E RGYB I Z 29

» TECHNOLOGY FRONTIER

Simulating and Stimulating Renewables A CONVERSATION WITH DAN ARVIZU // BY MARTIN ROSENBERG

THE NATIONAL RENEWABLE ENERGY LABORATORY is putting the finishing touches on a gleaming new facility that will give a big assist to utilities looking for ways to integrate large amounts of renewable power into their generation mix. The Energy Systems Integration Facility is considered the first of its kind capable of “integrated megawatt-scale research and development” of the equipment and strategies to make solar and wind resources more reliable. About 200 scientists and engineers will work at the 182,500-square-foot installation, which will also feature one of the fastest computers in the world dedicated to energy efficiency and renewables.

EnergyBiz recently sat down with Dan Arvizu, NREL director, to discuss the implications of the project that will attract utilities, manufacturers, vendors and researchers to Golden, Colo. His comments were edited for length and style.

issues. We’re still developing what the business model looks like, how costs are going to be shared, and what roles the various players will take. We’re having a series of workshops. We just had a workshop with executives from the Electric Power Research Institute.

In addition, vendors and project developers will have to be part of this.

What is the total investment in the Energy Systems Integration Facility?

How will this facility compare with renewables integration labs in Denmark, Japan and other nations?

ENERGYBIZ

In 2008, 2009 and 2011, $135 million was appropriated. It’s the next big step in terms of high penetration of distributed sources.

ARVIZU

Do you expect to see all the major utilities engaged at the facility?

ENERGYBIZ

ARVIZU I’ve talked to a number of utilities’ executives at Xcel, Duke, Sacramento Municipal Utility District, several California investor-owned utilities and others.

They’re good partners of ours. They are extremely interested and eager to connect on several different 30 E N E RGYB I Z March/April 2013

Will your utility managers come here to run tests? Or could they use it remotely?

ENERGYBIZ

ARVIZU We intend for the facility to be as userfriendly as possible. Depending on what part of the system they’re interested in, they might have to come here to load their simulation software or connect to our system. We’re still thinking through the process of what experiments can be run and what the business model looks like. It SAVANNAH will be set up as a user facility for industry.

RIVER HELP

ENERGYBIZ

ARVIZU It will be a major contribution to the state of the art. I’ve looked specifically at systems integration capabilities, and from what I’ve seen there’s nothing like this anywhere in the world. It will be a complement to existing capabilities.

The Savannah River National Laboratory is helping Tokyo Electric devise strategies to recover from the 2011 Fukushima nuclear accident, according to a report in the South Carolina Aiken Standard.

The Japanese officials said they want to tap the lab’s expertise in groundwater cleanup.

ENERGYBIZ Several countries have a much higher penetration of renewables on their grids right now than we do. Are they ahead of us in

Photos by Dennis Schroeder, courtesy of NREL

terms of understanding how to best integrate intermittent resources?

There are several countries that are ahead of us in deployment, and they are quickly gaining real-world understanding that we have yet to experience on a large scale. Germany is ahead of us.

And Denmark.

ARVIZU

Where do you think you can make your mark with the facility?

ENERGYBIZ

We plan to have the biggest impact with the scale-up of alternative energy technologies in the United States. China is very eager to learn about this because they have grown so rapidly that they have big integration issues. The last time I went to China and met with the State Grid, I saw a bunch of young research scientists and tremendous resources being pumped in. They’re buying every simulation software package in the world. They’re buying them from Denmark and Germany. They’re trying to buy them from the United States. They are moving up a learning curve very rapidly, so if we are to keep on the leading edge of integration issues, we need to step up our R&D. ARVIZU

How fast can renewables grow domestically in an era of abundant, cheap natural gas and flat power demand?

ENERGYBIZ

ARVIZU Independent of these dynamics, including natural gas expansion, the future demands a more diversified portfolio. Right now, more than half of new generation is natural gas fired. The other half is mostly renewables of all kinds. We expect this trend to continue for perhaps the next 20 years.

So what’s the potential growth of renewables, and how will this facility help speed that up?

ENERGYBIZ

We’re all about acceleration. Utility companies need to reduce the risk of ramping up this part of their portfolios. They’re not going to scale anything up if they don’t understand it. So that’s what this facility is for. If they are not convinced that scaling up these technologies is compatible with their system, including maintaining reliability consistent with their business model, they won’t do it. They need a place to come and kick the tires. The demand for new energy is relatively flat in North America and in Europe. If you think ARVIZU

energybiz.com E N E RGYB I Z 31

» TECHNOLOGY FRONTIER about the problem holistically and from the perspective of the long term, the key to getting the developing economies to participate is making the renewable technologies cost-effective so that they become the technologies of choice in the marketplace. Emerging economies probably aren’t going to make sacrifices on the basis of social or environmental concerns alone.

Describe the complex computer modeling you will be doing here.

ENERGYBIZ

For the high-performance computing capability we envision, we need to collaborate with the private sector, so we didn’t just buy a computer, we formed a partnership. In this case, our relationship is with HP and Intel, who intend to pull together a new class of product. They see a big market for this type of capability. This is a partnership that will continue to evolve over time. We’re doing this in phases. We’ll put in the first basic part of the system and build it up to a very fast petaflop machine capable of 1 million billion calculations per second. This machine will allow us to run very complex codes that simulate a real-world grid operation, virtually, and let us ask a lot of technology-specific questions and model potential technology performance.

ARVIZU

ENERGYBIZ

What exactly will you do for utilities?

ARVIZU We want to be able to import their real-world data. Many of them don’t know in detail how these renewable systems are impacting certain aspects of their own grid.

ENERGYBIZ

What was the genesis of this facility?

Discussions of concepts started during the Bush administration, around 2006. I’m in my eighth year at NREL. Right after I got here, I started looking at the capabilities of this laboratory and what needed to happen next. One of the things that we focused on was the importance of strategic energy analysis.

ARVIZU

Dan Arvizu, right, tours the new Energy Systems Integration Facility.

We needed an analytical capability to figure out how renewables fit into a marketplace that’s really complex.

If the only tool that you have is a hammer, everything looks like a nail, right? That was the mentality that we had. Solar was all about solar, and they thought wind was the enemy. Our more sophisticated analysis showed that we couldn’t think about it that way.

It’s really about an integrated set of new alternative technologies. From my perspective, fossil fuels are going to be here for a long, long time. The question is how will we best integrate renewables so that we can truly diversify our generation portfolio. Only through diversification can we address the bigger, longer-term energy challenges we face.

Will this faculty be fully operational by the end of this year?

ENERGYBIZ

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32 E N E RGYB I Z March/April 2013

That’s our plan. Many things are coming together, so we’re jazzed. The next big thing is systems integration. Technology by technology, we will continue to make progress. The major issue is how this broad portfolio of technologies will work together.

The technology is moving. The innovation is phenomenal. And I’m as optimistic as ever about the potential of renewables.

ARVIZU

Nesting APPLE ALUMS FOCUS ON THE THERMOSTAT // BY RICHARD SCHLESINGER OF ALL THE THINGS we never think about, the home thermostat must rank pretty high.

Most of us just get along with whatever came with the house; of those who actually buy a new, programmable thermostat, a full 90 percent never bother to program it. So why write about a $249 thermostat?

Because it just may be the device that finally engages the public in the idea that energy can be more than a commodity and that they can become active in managing their energy use. The smart, attractive, interactive thermostat from Nest Labs could turn out to be the switch that turns the smart utility on for the average consumer.

With the proliferation of smartphones, tablets and voice-activated information systems in our cars, we’ve become inured to the concept of smart devices, but the term is worth considering. Essentially, a smart

device is one that responds to us — a gadget with which we carry on a dialogue. In a weird way, it humanizes inert objects so that they begin to take on personalities that we can relate to.

The Nest thermostat is such a device. It’s probably the most physically attractive thermostat out there, and it’s certainly the most responsive. The small, round, elegantly simple Nest lights up when you walk past it, showing you the temperature and whether it’s making your house warmer – it glows red – or cooler – it glows blue. When you turn it up or down, it remembers the temperature you’ve set and when you set it. It learns how long it takes your house to reach the temperature you like, so if you set it to 68 degrees at 7 in the morning, and it takes 15 minutes to reach that temperature, Nest starts the furnace at 6:45 a.m.

It takes note of when you’re home, when you’re away,

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energybiz.com E N E RGYB I Z 33

and when you usually return so that it can turn down the heat or cooling when you’re out and get your home to the right temperature just before you return.

Although you can, you don’t really have to program the Nest thermostat, since over the period of a week or two it learns your domestic routine and adjusts itself accordingly. If, however, you alter that routine, you can always call home, from a smartphone or tablet, and tell Nest to turn the heat up or down, so that you arrive home to a house at just the right temperature.

The Nest derives its smarts from an impeccable pedigree. Its founders are Tony Fadell, who led the team at Apple that created the first 18 genPhoto courtesy of Nest erations of the iPod and the first three generations of the iPhone, and Matt Rogers, who was responsible for developing the iPhone’s software. The company’s vice president for technology, Yoky Matsuoka, won a MacArthur “genius” award for her work in robotics and neuroscience. As Matt Rogers put it, “Our DNA is very different. We’re a consumer company with a lot of really deep technology and userexperience roots that are very hard to reproduce.”

Rogers noted that half of home energy use is for heating and cooling, a fact that would certainly engage most homeowners if you could just grab their attention — precisely what Nest is designed to do.

“This significant use of energy has been controlled for decades by old technology in white plastic boxes,” Rogers noted. “We started the company with the express purpose of revolutionizing something people had long taken for granted and come to ignore. We knew we could add connectivity, intelligence, beautiful design and algorithms to transform what was invisible into something incredibly new. We knew we could add a ton of value and build a great consumer experience that would help people save a lot on their energy use.”

When Nest launched in the fall of 2011 it sold out almost immediately. Over the next couple of months, Nest Labs scrambled to build supply and a network of retailers, including such consumer destinations as Best Buy, Lowes, Apple and Amazon. At the same 34 E N E RGYB I Z March/April 2013

time, Nest Labs looked for energy providers with which to partner. Focusing on deregulated markets, the company chose Reliant, one of the dominant players in Texas.

Bill Harmon, Reliant’s vice president of residential segment marketing, sees the Texas energy market as analogous to the cellphone market, with various providers competing for customers. Reliant thought a free Nest could be for the energy provider what a free or nearly free iPhone is to cell service companies: the lure to attract customers to sign long-term contracts.

They partnered with Nest Labs to provide a free Nest to customers who sign up for Reliant’s “Learn and Conserve Plan,” which offers a fixed price for two years. “It quickly became one of our most popular electricity plans, and we get fantastic feedback about the plan and the Nest product from our customers,” said Harmon. “In particular, they love the fact that Nest programs itself, that they can control it from their mobile devices and that it really lowers their electricity bills.”

Harmon sees the program with Nest as key to moving customers from passive users of electricity to active participants in managing their power usage.

That’s essential if utilities are to reap the advantages provided by smart grid technology. While the Nest thermostat does not rely on smart metering, it serves to make customers aware of the savings new energy technology makes possible.

Nest Labs estimates its thermostat can NUCLEAR WASTE lower usage by about 20 percent for the The Department of average homeowner. That’s a real incenEnergy said that an underground facility may tive for customers to become involved. be developed to store Harmon estimates that almost 700,000 high-level radioactive waste by 2048. of the company’s 1.5 million customers Congress, the Obama are now enrolled in at least one of its administration and the public will consider smart energy products and services. the plan developed by Nest comes on the scene at a critical scientists and industry leaders, according to a time, when the concept of the smart grid report in the Kennewick, is coming into its own and utilities all Wash., Tri-City Herald. over the country are implementing smart meters. Harmon believes we’ll see a tipping point over the next five to 10 years, when home energy management solutions will expand beyond the HVAC system to include lighting, smart appliances, the next advance in distributed generation and load shifting. Nest could turn out to be the energy management equivalent of the iPhone, the ultra-cool device that makes energy management more ubiquitous.

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» INTRODUCING

Empowering the Customer OGE’S PETER B. DELANEY // BY MARTIN ROSENBERG A century-old Oklahoma company is in the vanguard of utilities revolutionizing the way electricity users power their lives. At the same time, OGE Energy is close to the top of the list when it comes to delivering sterling returns to its investors. It serves 789,000 electric customers in its home state and western Arkansas.

EnergyBiz recently interviewed Peter B. Delaney, the company’s 59-year-old chairman, president and chief executive officer about the utility’s culture and technological innovations. His comments, edited for style and length, follow.

ENERGYBIZ OGE is getting a lot of attention for its financial accomplishments.

DELANEY Our capitalization is $5.6 billion. Over five years, the total shareholder return, which is stock price appreciation plus dividend yield, was nearly doubled. Not bad.

ENERGYBIZ

How did you do it?

DELANEY There’s no one simple answer because it takes everybody to do it. We have two businesses: OG&E, the utility, and Enogex, a midstream natural gas company. You have to think of the utility sepa38 E N E RGYB I Z March/April 2013

rately from Enogex. What is critical to success in any business, and what I spend a lot of my time on, is culture. I spend my time on strategy and providing direction. Then, I spend my time on making sure there are organizational capabilities in place to execute on strategy EDITOR’S NOTE and ensuring that we’ve built Peter B. Delaney will a senior management team be speaking at the that’s effective. Culture eats EnergyBiz Leadership Forum in Washington, strategy for breakfast. Our March 18-19. smart grid is a great example www.energybizforum.com of that. We started in 2005 to think about smart grid, which is our advanced metering infrastructure investment.

Everybody said if you have silos in your company, it’s going to be hard to implement these systems that really impact all your businesses. You have to have

If we operate safely, ethically and with excellence, and we do it as a team, the revenue targets and the earnings will flow from that.

Photo courtesy of OGE

effective cross-functional teamwork. That gets back to a cultural issue.

ENERGYBIZ How would your values and core beliefs differ from any other utility?

DELANEY The company has always had great values. I just put them in writing and made sure that we understood what they were and that they were non-negotiable. You cannot, if you don’t have trust in your organization, have effective teamwork. You’re not going to get feedback. People won’t feel comfortable giving feedback because they’ll be afraid that doesn’t help their career. And if you don’t get feedback, you can’t improve. If you want to drive effective teamwork across areas, you have to bring people together, and you have to have a culture of trust. A lot of the values that we thought about drive trust.

What are the values that relate to your customer?

ENERGYBIZ

DELANEY Integrity, public service, individual safety and well-being, respect, teamwork and transparency.

We want to be transparent with our regulators. We

want to be very transparent with our customers. That’s why we’re giving them a smart grid and information about how they can wisely use their energy. I need to justify all my decisions and be very transparent about what we’re trying to accomplish and why we make decisions and why we do things.

OGE had $130 million in federal stimulus funds that you used to jump-start a $366 million program with state regulatory buy-in.

ENERGYBIZ

DELANEY We have roughly 800,000 of our customers with smart meters deployed. We have the communication backbone.

That’s all your customers in Oklahoma and Arkansas?

ENERGYBIZ

Everybody. We did many things no one has ever done before. To do that over a three-year period, and bring it in on time and on cost is a testament to a lot of great work from many people, and to working processes effectively across many parts of our company.

DELANEY

energybiz.com E N E RGYB I Z 39

» INTRODUCING What are some other examples of unique OGE initiatives?

ENERGYBIZ

There’s a lot of good customer value that goes with being able to hook customers up pretty quickly. If for some reason, for nonpayment, for example, you lose your power, you can go to a kiosk machine, swipe a credit card, and by the time you get home your power will be back on automatically without any humans getting involved. So we’ve been able to really automate that.

DELANEY

ENERGYBIZ

Do you know other utilities that

do that?

No. There are not many utilities that I know that are able to remotely disconnect and connect. You can get into the website and look at your consumption information, on your iPad or whatever, hourly. Every day of the week, you get texts saying, ”Here’s what you’re spending,” with reminders to go look at the website. You can look and see how your house is performing relative to others in your same ZIP code. It also shows you what the efficient home consumption would be. We are able to, very shortly after the meter is installed, start getting them information that they can see value from. There are many ways to deploy this. We had different objectives than others. We’re trying to engage our customers. As we deploy these meters, we need to get the customer engaged in realizing there are some things they can do now that they were not able to do before, which gives them value associated with this investment.

In parallel, of course, we’re getting operational benefits. But one of our main objectives is to change customer behavior around the way they use energy.

We believe the way you change behavior is through engaging and making decisions on a voluntary basis.

We don’t believe in direct load control, because that’s not really driving their behavior change.

DELANEY

ENERGYBIZ

How does your demand response work?

We said that if you sign up for this program, we install up to four $300 thermostats for free, and we send signal pricing to them. On peak, between 2 p.m. and 7 p.m. on summer weekdays, the price per kilowatt-hour will vary by 5 cents, 9 cents, 22 cents or 46 cents per kilowatt-hour, which occurs during critical events when we have perhaps a very hot summer and we’re using much of our capacity.

Customers can program the thermostat for either comfort or savings. If you program it on savings, when DELANEY

40 E N E RGYB I Z March/April 2013

that thermostat sees the price come across, it automatically will raise your thermostat four, five or six degrees. And so the customer doesn’t need to be home. He just sets the thermostat for what he wants to achieve. Off peak, which is the other 19 hours a day and weekends and holidays, the prices are much less. You get down to around 5 cents. So we’ve seen customers save on average between $175 and $200 across the four summer months. We’ve seen customer satisfaction really skyrocket with these programs, because they’re more in control and can make their own decisions. We’ve seen their behavior change.

People are doing all sorts of things to move consumption out of the peak window into where it’s going to cost them less. We have more than 40,000 customers signed up with these thermostats in their homes.

The smart meters allow us to do this.

The way you change behavior is through engaging and making decisions on a voluntary basis.

ENERGYBIZ

How big can the program grow?

DELANEY Our goal is to have 120,000 customers.

That’s over a three-year period, which is a very high engagement rate. Nobody has done this. I’m not aware of anybody else who has anywhere close to 40,000-plus people with programmable, communicating thermostats being sent price signals.

ENERGYBIZ Have your state regulators granted you special time-of-day rates?

DELANEY Yes. We’re estimating we saved about 70 megawatts of load at the peak. We set out a 2020 plan in 2007 that said we don’t want to build any new incremental capacity until after 2020. In order to do that, we had to shave our peak. We had to do various things. One of them is to get above 300 megawatts in savings from our demand response program.

That’s what’s driving it.

ENERGYBIZ So if you could ramp the program up fivefold, you would save 300 megawatts?

DELANEY Yes. If we can avoid building a power plant everybody saves. Usually in the summer you’re running your least-efficient natural gas plant. So those incremental fuel costs are very expensive. So if you

can burn, use less of that plant, everybody shares the fuel cost savings.

One does not think of Oklahoma as the technology center of America. It sounds like what you’re describing is really at the leading edge of what utilities are doing in America. How did you get there?

ENERGYBIZ

That’s a good question. It’s hard to pin it back to one thing. I get that question a lot because we are in Oklahoma. But I’ve got to tell you, the first commercial combined-cycle natural gas plant was built at OG&E back in the 1940s. Maybe it’s the culture of Oklahoma. In 2007, we said we’re not going to build any incremental capacity until after 2020. And the regulator said, “How are you going to do that?” We were originally looking at a small pilot before the Department of Energy stimulus grant money became available. We decided that we were going to do everything we can to not build that generation. That’s a pretty big shift. And the culture has to go with that shift, too.

DELANEY

So you have 6,800 megawatts of generation.

ENERGYBIZ

Yes, we have a fuel mix of natural gas, coal and wind. While coal is the primary fuel source, we’re now burning much more gas.

DELANEY

ENERGYBIZ What do you think are the biggest challenges that the industry faces?

If you look over the last 30 or 40 years, when you’ve taken into account inflation, electricity prices have decreased. But we’ve got a lot of costs coming tied to reliability, cyber security, regulation, increased cost of new construction and the cost of new transmission.

DELANEY

ENERGYBIZ Do we need a national energy policy, and if so, what should it look like?

DELANEY The administration’s policy has been to increase the price of fossil fuels. It’s very much a green agenda. Despite the subsidies going to renewables, it still is not a big part of our generation mix.

ENERGYBIZ

What should be changed?

DELANEY The administration should follow the regulations as they were passed by Congress. Everybody wants cleaner energy, but we need to do it in a smart way that really mitigates impact on customers, especially low-income customers. energybiz.com E N E RGYB I Z 41

» LEGAL ARENA

Paying for Security STATES PLAY KEY ROLE // BY PHILIP B. JONES CONGRESS HAS BEEN GRAPPLING with cyber security for months, and the executive branch is circulating an order calling for greater coordination among agencies.

At the National Association of Regulatory Utility Commissioners, we’re making our views known in a coalition that is monitoring the legislation. We want to ensure that any key coordinating agency doesn’t usurp the statutory roles of the Federal Energy Regulatory Commission and the North American Electric Reliability Corp. in setting the grid’s rules and standards.

42 E N E RGYB I Z March/April 2013

The federal government will play the primary role in ensuring effective cyber defenses, but states will also have a key role. State agencies are closest to the situation; we know our geography; we know our utilities and EDITOR’S NOTE their infrastructure; and we know Philip B. Jones will how our utilities have responded be speaking at the to natural disasters.

EnergyBiz Leadership At the state level, we are Forum in Washington, March 18-19. ultimately responsible for ensurwww.energybizforum.com ing that our utilities manage risks well. Many of the risks our utilities face are well known — aging infrastructure, Mother Nature, legislative uncertainty. But cyber security is an emerging and dynamic risk that all stakeholders, from

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» LEGAL ARENA

the federal government to the regulators and the utilities themselves, are grappling with.

One thing is certain: Cyber security will require capital investments and recovery in retail rates. We don’t yet know what those amounts will be. But in order to make sound decisions, we must have the foundational knowledge and tools to measure risks.

For utility regulators, our most prudent course of action is to act decisively now to increase our knowledge base, educate our staffs, coordinate with federal and state agencies, and encourage best practices.

NERC, through its Critical Infrastructure Protection program, offers a detailed compliance-based approach. But the “hactivists” are smart and nimble in creating viruses that infect computers, servers and supervisory control and data acquisition systems. As the risks evolve, we must be able to adapt quickly to new threats and circumstances. We should recognize that the utilities we regulate are partners in our common goal of providing safe and reliable service, but we must also guard against overinvestment.

Gatherings// Legal Arena April 23-25

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April 29May 3

CS Week

Tampa, Fla.

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44 E N E RGYB I Z March/April 2013

As we prepare at the state commissions to address cyber security, we must realize our traditional strategies for assessing risks are no longer adequate.

We need to broaden our scope of risks, re-orient our methods and adopt a more long-term view of risk assessment.

For example, the NERC approach relies heavily on developing rules, due process, a published standard, required annual audits and substantial documentation. NERC’s rules are good and have evolved over time, but BPA CHIEF in general, they can be characterized Bill Drummond will as transparent, static and audit-driven. lead the Bonneville Power Administration, Cyber risks have the opposite characcording to a report by acteristics. They are hidden, dormant, The Associated Press.

Drummond, former increasingly sophisticated, dynamic deputy administrator, and impervious to audits. And cyber will replace departing administrator Steve risks can’t be characterized by the Right, who held the traditional distinction between distribupost for 12 years. tion — less than 100 kilovolts regulated by states — and bulk wholesale power AIR POLLUTION UPDATE regulated by FERC. Toxic air emissions How exactly does a utility perform last year were down a useful risk assessment, and how 8 percent from 2010, according to the do you oversee such measures?

U.S. Environmental You start by assessing vulnerabiliProtection Agency, UPI reported. ties — including wireless technologies The annual report said and thumb drives. Assess the threats the drop centered on and outline possible consequences. reduced hazardous air emissions.

Evaluate your entire organizational structure in order to address those vulnerabilities and threats. Next, reorganize to align traditional security with cyber defenses and establish clear lines of accountability. Then prioritize your resources, budgetary, of course, but even more importantly, human resources.

Read the NARUC primer, “Cyber Security for State Regulators,” that was published in June. Acquire basic knowledge by sending questions to your utilities, meeting with them and building your team at the state level.

Ultimately, the additional costs of counter measures will come before state utility regulators. So it’s time to engage with industry and learn up-front about the potential risks and costs.

Philip B. Jones is president of the National Association of Regulatory Utility Commissioners and a commissioner on the Washington Utilities and Transportation Commission.

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» FINAL TAKE

Pittsburgh’s Energy Partnerships UNIVERSITY AND INDUSTRY PURSUE BREAKTHROUGHS // BY GREGORY REED AS THE UNITED STATES MOVES toward continued energy independence in the 21st century, the Pittsburgh region is providing a critical leadership role as it did during the turn of the 20th century and the Industrial Revolution. While many today think of southwestern Pennsylvania as the nexus for Marcellus Shale gas exploration, the region has long been at the center of energy revolutions. Indeed, long before fracking became a household term and horizontal drilling rigs dotted the landscape, Americans such as George Westinghouse and Andrew Carnegie took advantage of the region’s natural resources and a dedicated hardworking population to create a nascent energy economy.

Westinghouse spurred the electrification of the country in the early 1900s with the development of critical AC power transmission technologies, establishing an infrastructure for equipment manufacturing, research and development, and expertise that continues today. Carnegie led the country during the Industrial Revolution by transforming the steel production process and making Pittsburgh its global headquarters.

Other examples abound. The region is home to one of the nation’s largest coal seams and is the birthplace of the country’s first nuclear power plant at Shippingport, Pa., both of which have contributed to economic electric power generation for decades.

All of this — from natural resources to technology and talent — positions Pittsburgh as a national center for 46 E N E RGYB I Z March/April 2013

energy. Today the region boasts a diverse population of energy-related companies with national headquarters and major operations located here, including ABB, ANSYS, CONSOL Energy, Dominion, Eaton, FirstEnergy, General Electric, Mitsubishi Electric, Range Resources, Siemens, Westinghouse and many others. The region is also home to the U.S. Department of Energy’s National Energy Technology Lab (NETL), which has provided the nation with important breakthroughs in energy technologies and research for over 100 years and is currently expanding its capabilities through a regional university alliance.

Supporting this tremendous corporate growth is the presence of world-class universities and research facilities at the University of Pittsburgh, Carnegie Mellon University and other regional institutions.

At the University of Pittsburgh, the Swanson School of Engineering and the Center for Energy — bolstered by a transformative $22 million gift from the Richard King Mellon Foundation — have expanded engineering and technical programs to train the next generation of talent for the electric power and energy sector, and are contributing to critical research efforts and

The region has long been at the center of energy revolutions.

Continued on page 48

Photo courtesy of the University of Pittsburgh

University Grid Alliance SPURRING TECHNOLOGY // BY GREGORY REED

THE U.S. DEPARTMENT OF ENERGY’S National Energy Technology Lab (NETL) recently established an important regional university alliance (RUA) to augment its research and development capabilities, working closely with key university centers and faculty researchers.

The NETL-RUA institutions consist of the University of Pittsburgh, Carnegie Mellon University, Penn State, Virginia Tech and West Virginia University, with additional support from URS Corporation and the University Energy Partnership. Much of the effort to date has focused on NETL’s core mission of energy technologies in areas such as carbon sequestration, gas hydrates, advanced energy materials and computational methods, to name a few.

As part of a strategic growth plan in partnership with the universities, NETL is currently expanding its research portfolio to include tangential areas in electric power and energy development, including electric power grid technologies.

The Grid Technologies Collaborative (GTC) was established in mid-2012 with a mission to

lead new developments, demonstrations and applications of grid-scale power electronics devices and systems, including advanced Flexible AC Transmission Systems, High Voltage Direct Current Systems and emerging hybrid AC/DC infrastructure. This mission aligns with the nation’s need to enable an advanced electricity transmission and distribution system that is efficient, reliable and resilient; integrates clean energy generation resources, energy storage and advanced operational concepts; and enables greater levels of consumer participation.

The group brings complementary strengths together from each of the participating organizations that range from modeling and analysis to converter design and controls to prototyping and demonstration of new power electronics-based technologies.

The GTC is also developing key industry and public sector partnerships in order to strengthen technology development collaborations, and engages in professional training through advanced university curriculum, workshops and seminars. energybiz.com E N E RGYB I Z 47

» FINAL TAKE Continued from page 46

advances in technology developments through strong an academic leader in the development of future direct collaborations with regional industry partners, governcurrent-based infrastructure and technologies. ment sponsors and other constituents. Over the past Outreach activities include the annual Electric several years, Pitt has established concentration and Power Industry Conference, celebrating its eighth year certificate programs in electric power, nuclear, and in 2013, which brings together representatives from mining engineering. Within electric power engineering, academia, industry and government for technical proeducational programs have been developed at both the gram sessions and networking events. And recently undergraduate and graduate Pittsburgh was named the levels as part the Swanson pilot city for the newly estabSchool’s Electric Power Initialished National Academies tive. The curriculum consists of Science and Engineering of a strong set of traditional energy ambassador procourses addressing core gram, with a goal to better principals in electric power educate opinion leaders and that are augmented with others on the important role new offerings in emerging of science, technology and technology areas. engineering in our everyThrough strong industry day lives and to provide an collaborations that contribute enhanced understanding of to course development, the critical energy challenges. program is not only educatPittsburgh is having a ing the next generation of dramatic impact on the Photo by John Altdorfer, power engineers, but also nation’s overall energy stratcourtesy of the University of Pittsburgh developing the future leaders egy, based on a strong heriof the electric power industry. The curriculum is robust tage and history in power and energy developments, and covers a wide range of electric power engineering and a renewed focus that stresses the importance of subject matter, including new courses in smart grids, collaboration among all constituents. power electronics, renewable and alternative energy Gregory Reed is an associate professor in the Department of Electrical and Computer Engineering at the University of systems and other relevant areas associated with modPittsburgh Swanson School of Engineering, and director of the ernized power grid and energy system development.

Electric Power Initiative at the university’s Center for Energy.

Plans are currently under way to launch a new graduate certificate option in electric power that will be offered ADVERTISER INDEX through synchronous distance learning, breaking down geographic barriers to education and providing Company Page URL enhanced opportunities for part-time students. These CSWeek 7 www.csweek.org DNV KEMA 20–21 www.dnvkema.com initiatives establish a model program for the resurgence Elster 27 www.elster.com and sustainability of university-based electric power EnergyBiz 43 www.energybiz.com engineering programs in the United States. In addition EnergyBiz Leadership Forum 36–37 www.energybizforum.com EnergyCentral Jobs 19 www.energycentraljobs.com to its strong educational programs in electric power, EnergyCentral Pro 35 pro.energycentral.com/ Pitt’s graduate research program has advanced signifimembership/tour.cfm EnerNex inside front cover www.enernex.com cantly and includes research and development efforts EPIS 33 www.epis.com in emerging areas such as advanced power electronics Interactive Intelligence 9 www.inin.com Itron 3 onlyitron.com and control technologies – flexible AC transmission Power Engineers 1 www.powereng.com/nexstation4 systems and DC systems, renewable energy systems Quanta back cover www.quantaservices.com Structure 5 www.thestructuregroup.com and integration, smart grid technologies and applicaUtility Analytics Institute 45 www.utilityanalytics.com tions, energy storage and energy management. In Verizon inside back cover www.verizon.com/ powerfulanswers particular, the Pitt power research group has become

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48 E N E RGYB I Z March/April 2013

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