EnergyBiz NovDec2013

VOLUME 10 // ISSUE 6 NOVEMBER 13 // DECEMBER 13 energybizmag.com

A WINNING WORKFORCE

PEOPLE // ISSUES // STRATEGY // TECHNOLOGY

SIMULATING A POWER COLLAPSE

What Regulators Say About Utilities’ Future THE FLORIDA PERSPECTIVE A CHAT WITH NEXTERA ENERGY’S

JIM ROBO

AN E N E RGY C E NTR AL PU B LIC ATION

NOVEMBER/DECEMBER 2013

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24 Features

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WHAT REGULATORS SAY ABOUT UTILITIES’ FUTURE

The utiliy world state regulators oversee is changing — big time.

Huge storms occur with increasing frequency. Cyber terrorists threaten. Technology may alter the business model of power companies. Listen in as state regulators discuss these issues.

39 Departments O U R TA K E

4 Disruption BUSINESS EDGE

6 Crowd Sourcing Solar 8 Recruiting and Shaping

16

FUTURE GENERATION Abundant, cheap natural gas is changing how America gets its power. What is coal’s future role? What are the latest innovations in renewables and energy efficiency?

17 Maintaining the Fossil-Fuel Option 19 The Case for Coal 20 Aggregating Solar 22 The Zero Energy Option

a Winning Workforce 9 Embracing Distributed Energy T E C H N O LO GY F R O N T I E R

27 Need for Smart Inverters 28 Creating a Transactive Energy Framework INTRODUCING

24 SIMULATING A POWER COLLAPSE

The inside story of a landmark test of power grid resiliency this November. What can the industry learn? What fixes are needed?

32 The Florida Perspective/ James L. Robo LEGAL ARENA

36 A New Framework for Strategic Planning

38 States Continue to Lead Vol. 10, No. 6. 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 November/December 2013

F I N A L TA K E

39 Make Mine Red

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» OUR TAKE Disruption WILL UTILITIES BECOME DUSTY MUSEUMS?

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

STATE REGULATORS AT THE SUMMER MEETINGS of the National Association of Regulatory Utility Commissioners talked quite a bit about the changing business model for utilities. There is much to ponder on that front.

A New York Times article this summer reported that Walgreens is erecting a test zero energy use store north of Chicago that will potentially produce more energy than it consumes. A company executive agreed to provide us with an essay on the project. Since the property will create a surplus of an estimated 56,000 kilowatt-hours of electricity a year, I decided to include the write-up in our feature, “Generation Mix – 2014 and Beyond.”

Recently, the Wall Street Journal carried a front-page article headlined, “Companies Unplug from Grid, Delivering a Jolt to Utilities.” It reported that Kroger is using wind turbines, it is producing biogas from its own organic waste, and it is using solar units to help achieve $160 million a year in electricity savings.

That is $160 million that utilities will not be receiving.

Walmart, Costco, Kohl’s, Ikea and Macy’s own solar generation fleets that rival those of utilities.

AEP’s chief executive, Nick Akins, told the Journal that utility executives must ask, “Am I going to sit here and take it and ultimately be a caretaker of a museum, or am I going to be a part of that business?”

Utilities for good reason have been fixated on their flat to declining sales — the legacy of a recession and customers’ focus on energy efficiency. But at the same time, new technologies are enabling utility customers to become increasingly self-reliant. That is appealing as increasingly bad weather in many parts of the country has resulted in prolonged, nasty power outages. Energy users want to take steps to protect themselves. Inevitable breakthroughs on the energy storage front will accelerate power industry changes.

It will be hugely interesting to watch what Nick Akins and his peers decide to do in response to this sea change in their business. Billions of dollars in assets will have to be redeployed.

Billions of dollars in investments will be made.

A Walgreens and a Walmart have the resources to figure this all out for themselves.

And they are.

Will utilities be able to create a business enabling the neighborhood dry cleaners and pizzeria, and homeowners, to plug into this looming energy revolution?

mrosenberg@energycentral.com 303.228.4725 COPY EDITORS Don Bishop,

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Martin Rosenberg, Editor-in-Chief editor@energybiz.com 4 E N E RGYB I Z November/December 2013

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SECURING POWER Strategies & Policies for a New Era

The threats aren’t a secret, the solutions shouldn’t be either.

Join us as we identify innovative solutions

Attend Energy Biz Leadership Forum if you are concerned about, have experience with or need to better understand

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Register today at www.EnergyBizForum.com, or call 303.228.4764.

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» BUSINESS EDGE

Crowd Sourcing Solar THE FUTURE OF ENERGY INVESTING // BY BILLY PARISH TO UNDERSTAND HOW IMPORTANT finance is to energy, and vice versa, we have to go back to the beginning. J.P. Morgan was the first person to have his home and business blaze with electric light. Thomas Edison himself flipped the switch.

Edison needed funders like Morgan because he was establishing the groundwork for the electrification of a planet. He needed big finance.

Fast forward to the present: JPMorgan Chase is now the world’s second-largest financial company, General Electric is the world’s third-largest company of any kind, and the U.S. electric grid is the largest machine ever built.

Our energy system and our financial system have always run in tandem. The two grew up together and have played off of each other to become history’s largest and, arguably, most centralized industries.

6 E N E RGYB I Z November/December 2013

With that in mind, let’s turn to a question that many people are asking these days: How do we get off of fossil fuels?

Plenty of modern-day Edisons are already on the job. Twenty-five-year old Danielle Fong is revolutionizing energy storage. Elon Musk has built an electric sedan that Consumer Reports called “the best car we’ve ever tested.” Tony Fadell, who designed the first 18 iPods, now runs Nest, a company reimagining the thermostat and home electronics.

But if we look back to the beginning, we see that energy innovations are only half of the solution we need. If we want a new energy system, we need to build a new financial system, too. Who will be the modern-day Morgans to our modern-day Edisons?

One answer is you. And me. And everyone we know.

Here’s how it will work.

Think of the challenge of transitioning to clean energy as a massive capital misallocation problem.

We’ve spent a lot of money building a global system

of fossil-fuel power plants, electric grids, mountaintop exploding bombs, mile-deep wells, hydraulic fracturing rigs — the list goes on. Shifting the world onto a clean energy path means shifting trillions of dollars toward investments in an entirely new energy infrastructure.

The key word here is investment. In recent years, costs for solar and wind power have plummeted, while the costs associated with fossil fuels have risen.

Many experts agree that the task of building a clean energy economy is a massive wealth creation opportunity.

And while global investments in new clean energy generation capacity rose 600 percent between 2004 and 2011, this is still not nearly enough. To stabilize the climate, we need to be investing in new clean energy generation capacity at between three and six times current rates. We’ll never make that leap with our current financial system, in which less than 5 percent of banks finance solar projects.

This shouldn’t be surprising. After all, our largest investment institutions have spent their entire histories learning how to effectively finance huge, centralized energy FACE-OFF projects. Our banks have simply Edison International not yet developed — and may never is battling its Edison Mission unit over develop — the processes necessary allegations filed in to invest in a new energy paradigm U.S. Bankruptcy Court in Chicago, that favors many small, distributed according to Dow components. Likewise, our financial Jones and Company. regulations and legal structures have Edison Mission, which operates coal, gas and evolved to facilitate massive pipelines wind plants, alleged that and power plants, not solar panels Edison International has refused to turn and home energy upgrades. over documents, while Simply put, our financial system is Edison International said it has been cooperative. shaped exactly like the energy system we’re trying to leave behind. So why not create a financial system that mirrors the agile, decentralized, small-is-beautiful energy system we so desperately need?

Distributed finance is already taking off. Kickstarter now raises more money for the arts than the National

Endowment for the Arts, and Lending Club and Prosper have serviced more than $2 billion in loans. Given the enormous size of the energy industry, the democratization of clean energy investing will make it possible for people to directly participate in an immense wealth-generation opportunity.

Mosaic is leveraging the power of the Web to flood clean energy with inexpensive capital and empower people to invest and earn returns from solar energy. People have been earning returns on their solar investments since January, and we have had great success — fully funding 75 percent of our solar project investments within one week of posting them.

Recently, we crowdsourced investments from hundreds of investors across the nation to finance a 322-kilowatt solar installation on farmland in northern California. Investors will earn competitive returns as PG&E, the state’s largest utility, purchases the energy produced by the solar installation. We’ve flipped the old energy model on its head; we now have the utility purchasing energy that the public is financing. Investors earn 5.5 percent annual returns on the farmland array — over double the returns of a 10-year Treasury Note.

Mosaic’s investors do have something in common with J.P. Morgan. They’re enabling a new energy revolution, just as Morgan enabled the old. By the simple act of investing, they’re helping to secure a better future for our children, our communities and the planet. Today, we can all be clean energy barons.

Shifting the world onto a clean energy path means shifting trillions of dollars toward investments in an entirely new energy infrastructure.

Billy Parish is president of Mosaic, a clean energy investment platform, and the author of Making Good: Finding Meaning, Money and Community in a Changing World.

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» BUSINESS EDGE

Recruiting and Shaping a Winning Workforce MEGATRENDS // BY MARTIN ROSENBERG FOR YEARS, many in the utility industry have known that a tidal wave of employee retirements is fast approaching. It has begun to break. Russell Pearson, a partner with PricewaterhouseCoopers power and utilities group, has been talking to utility senior executives about the trend and its implications.

One West Coast utility executive who heard his presentation recommended that we talk to Pearson.

His comments, edited for style and length, follow.

What forces are shaping the utility industry today?

ENERGYBIZ

There are five or six megatrends. They include low growth, investment, aging infrastructure, the change of fuel mix and the changing utility workforce.

PEARSON

ENERGYBIZ

Is the retirement trend accelerating?

We’ve really seen it start to manifest itself recently. The statistics say that in the next three to five years anywhere from 50 to 70 percent of the workforce is eligible for retirement. We’re actually starting to see that happen.

PEARSON

ENERGYBIZ

How are utilities dealing with this?

A lot of utilities are undertaking transformational change. Companies are asking, “How do I re-look at my basic operations? How do I streamline my operations? How do I deploy new technology?

How do I dry up the cost of business?” I think they are doing that in a very aggressive manner. That level of change is also starting to manifest itself in the employees, who say, “You know I’m one or two years away from retirement. I don’t want to deal with learning a new system or learning a new process. I think now is the time to go.”

PEARSON

ENERGYBIZ

So what’s the new workforce like?

There are a number of things that the millennials believe that are the same as every other generation. The millenials and non-millennials want to have more options as to where they work and how they work. But there is now a changing attitude PEARSON

8 E N E RGYB I Z November/December 2013

about work. It is not a place; it’s an activity. That really has profound implications for work, how you structure a company and how you organize work. Millennials are putting a premium on work-life flexibility. They’re less willing to put in a significant number of excess hours early in their careers to get a benefit later. They are very interested in transparency.

Ask them, “How many of you have shared your compensation with your peers?”

Russell Pearson You find there is a significantly higher percentage of millennials who have done that than other demographic groups. They really want to see meaning in their work. They value teamwork and collaboration.

ENERGYBIZ Utilities tend to be conservative and slow moving. Does that create a clash?

PEARSON That was one of the interesting factors. One of the things that we continue to hear from the millennials GOOGLE WIND is the need to embrace technology.

Google will buy the power generated by a For utilities to continue to attract the 240-megawatt wind workforce of the future, they are going farm in the Texas Panhandle as it strives to have to embrace technology. They to run its data centers have to be flexible about how they on renewable power.

Google previously work using technology. Utilities also secured 570 megawatts have to look at management style and of renewable power, according to the become more transparent. Utilities Houston Chronicle. have to make sure that there is meaning in the work that is being done.

There have to be incentives for teamwork and collaboration. A number of utilities are redesigning their work spaces to make them much more collaborative, much more team orientated.

Embracing Distributed Energy BLOOM IN DELAWARE // BY GARY R. STOCKBRIDGE IN 2011 when Delaware Gov. Jack Markell and representatives of Bloom Energy approached me in my role as president of Delmarva Power, it did not take me long to see that Delmarva Power’s work with Bloom Energy would support both Delaware’s renewable portfolio standards and the economic development objectives of the state. Through rigorous negotiations, supported by strong state leadership focused on developing a winwin situation for the customers and both companies, we were able to help foster job growth, provide a reasonably priced baseload distributed energy resource in support of our grid and help the environment of the state. The Bloom project, along with additional wind and solar projects, is helping Delmarva Power reach the goal of 25 percent renewable energy resources in its energy portfolio by 2025, in addition to providing the company with diverse energy options.

There is value and benefit in the constant baseload power generation Bloom Energy servers, solid-oxide fuel cells made by Bloom Energy, can provide to areas that are difficult for the existing grid to serve.

Throughout the Northeast, there is evidence that companies like Bloom and the services they provide can, in essence, bolster an aging grid or fill holes in the grid where traditional power distribution resources are unavailable or not as reliable. Regarding reliability, not only are fuel cells a clean resource, but they may even be more useful when one thinks in terms of using them to implement microgrids that can backup the traditional grid, especially during large storms. All of this is an ongoing learning experience for the company.

On the surface, the relationship between Bloom and Delmarva Power was a practical fit to meet clean energy and renewable energy goals and options that are required in Delaware. But beyond the scientific and technical reasons, there is a common-ground approach of innovation, quality customer service and respect for community inclusion and improvement.

Additionally, placing people first has been a key

priority of both organizations since initial dialogue and meetings took place. Specifically, customer service commitments and messaging transparency when working with lawmakers, regulators and ultimately the customer have been ever-present.

Bloom’s fuel cell process takes patented fuel cell technology and allows companies such as Delmarva Power the opportunity to utilize a natural gas-based commodity with no internal combustion as a clean resource that qualifies for state renewable portfolio standard goals. In the future, the possibility of using landfill gas to run these fuel cells is also an option, creating another renewable supply possibility for the company.

Thus far, this process has benefited the natural environment in Delaware. Both companies’ consistent belief in good environmental stewardship led the consideration in putting this project in service for the benefit of all Delawareans.

As with all projects, the Bloom Energy venture has had and will have its challenges. However, when analyzed and measured from an investment standpoint, the benefits outweigh any potential hurdles over the lifespan of the project.

Over the next 21 years, Delmarva will work with Bloom to expose customers to an innovative, clean and dependable source of energy. In turn, Bloom’s activity in Delaware is set to create jobs and provide a baseload, reliable source of energy to the region.

That long-term commitment has the potential to positively affect the economy, workforce, infrastructure and community.

For the most part, we have met all our objectives and have taken advantage of this project to learn more about distributed generation and build a good relationship with Bloom. Although we look forward to the potential to expand the relationship to address other energy-related issues, the primary focus always has been and will continue to be providing environmentally friendly, affordable, reliable energy to our customers.

Gary R. Stockbridge is president of Pepco Holdings’ Delmarva Power Region. energybiz.com E N E RGYB I Z 9

What Say

10 E N E RGYB I Z November/December 2013

Regulators About Utilities’ Future PARTICIPANTS Susan Ackerman Oregon Public Utility Commission David Boyd Minnesota Public Utilities Commission Philip Jones Washington Utilities and Transportation Commission Robert Powelson Pennsylvania Public Utility Commission Barry Smitherman Railroad Commission of Texas

The Focus Is on Security and Reliability WHEN STATE UTILITY REGULATORS MEET UP these days, they’re likely

to ponder such things as the future of utilities’ century-old business model. They worry about cyber terrorists in far-off lands who threaten to crash the grid. And they swap stories about what their states had to do in the face of some recent horrendous weather events.

EnergyBiz recently sat down with a group of state regulators from every region of the country to talk about their views of the future of the utility enterprise. Their comments, edited for style and length, follow. » energybiz.com E N E RGYB I Z 11

UTILITIES’ FUTURE

We operate an energy-only, wholesale competitive market in ERCOT, which covers most of Texas, where we continue to experience load growth. We have 1,000 people a day moving to the Lone Star state. In ERCOT, we rely upon the market design and price signals to incent developers to build new generation. We don’t pay for capacity. It has worked well, but is presently challenged mainly because of the low cost of natural gas.

SMITHERMAN

ENERGYBIZ

Some retail customers will become decoupled from the grid and more independent from their local distribution company.

David Boyd

ENERGYBIZ How is the utility business model changing, and how should regulation evolve in response?

ACKERMAN It has the potential to change dramatically. But there is a big issue of timing. There could also be questions of regional differences. It could advance faster in some regions than in others. But it is probably time for regulators to take a really hard look at the pricing structure we have, the dollar per unit of energy sold. That seems to be a guaranteed source of difficulty for our utilities.

It is not that I think utilities ought to be protected from some of this competition that’s coming down, but there will be, for a long time, a need for the manager of the distribution system and the transmission system to make everything work.

Utilities are not in a death spiral. But there will be adjustments that will probably have to be made. The question is really timing.

For a state like mine, where utilities are vertically integrated, there is an issue here. The notion of a death spiral is not an impossibility as you see distributed resources coming online. Some retail customers will become decoupled from the grid and more independent from their local distribution company.

BOYD

12 E N E RGYB I Z November/December 2013

Is the regulatory compact going to change?

JONES It’s going to change. But the utility death spiral has been somewhat hyped. We are probably going to see change, but it’s probably going to be incremental.

The issues are ones of subsidies, rate design and how we compensate distributed generators. Do we do it through a competitive mechanism like an auction? Or do we pay them the full retail price? We have to drill down now into issues like low-income households. Are wealthy people going to be able to buy rooftop solar while they rely on the grid? Fixed costs still have to be recovered. In most of our states fixedcost recovery is a huge issue. The utilities are going to be made whole. We’ll find a way to do it. We have a lot of tools in the toolbox. In that sense, the regulatory paradigm, the regulatory compact, is not broken.

The way we go about providing rate recovery is through a long and arduous process known as a rate case that looks out five years or 10 years. If we are about safe, reliable, affordable delivery of utility service, then I don’t think a rate case has served us well in getting critical infrastructure replaced in a timely manner.

POWELSON

Many of you have had to deal with weathercaused massive power outages recently. How is that shaping the role that you play?

ENERGYBIZ

POWELSON We worked with the federal government to get resources deployed. With Hurricane Sandy we had nightly operations calls that I hosted. Gov. Tom Corbett was on those calls. We had 90 percent of our customers restored within a four-day period. What has changed is critical, timely communication with consumers. They want to know things in real time. With Sandy, it was the first time in our state that we had the ability to roll out social media. It was a game changer for us.

SMITHERMAN In Texas, with a long coastline, we get hurricanes. It’s not a matter of if we are going to get another hurricane — it’s when we are going to get another hurricane.

There are a couple of key things that can be done. One is pre-staging of materials and restoration workers in advance of the storm, so that when the storm passes, you can deploy these assets very quickly. Vegetation management will always be a thorny issue. What happens when a 100-year-old oak tree falls 70 feet from its base and wipes out a power line?

No one wants you to come into their yard and proactively remove that tree but tree limbs and entire trees are the principal outage culprits during a storm.

POWELSON Technology is going to be a game changer when you are dealing with weather events. As for vegetation management, what better way is there to cut trees than when you are doing restoration? The staging, or the pre-staging, is so important. This is like planning for a war. One of my utilities that went down to FPL in Florida took over an amusement park and made it a staging area with food, drinks and housing. Mutual assistance should not be overlooked. The Edison Electric Institute members need to do a better job of promoting it.

In the Northwest, we don’t have advance notice of our biggest threat, which is earthquake. Geologists in our region didn’t really realize until 10 or 15 years ago that the great risk to the Pacific Northwest is a massive 9+ magnitude quake. They happen on average now, they know, about every 290 years. The last one was 313 years ago. What we are looking at is a massive failure of everything, and there will be no warning. It will just happen. We are trying to get our utilities planning and communicating with local government and trying to figure out how they will respond once it happens.

You can’t stage something like that. We are going to be in a world of hurt when it happens.

The staging, or the prestaging, is so important. This is like planning for a war.

Robert Powelson

ACKERMAN

Susan Ackerman

What we are looking at is a massive failure of everything, and there will be no warning.

Do you have contingency plans against widespread outages?

ENERGYBIZ

We are developing them. It’s so new to us.

What we’ve been doing is asking our utilities in to talk to us about identifying their most critical and vulnerable facilities and what they can do to back them up, if possible. We looked at what happened in Japan after the recent massive earthquake and tsunami. One of the worst things that happens is that the roads are so clogged and impassable that you can’t move electric and natural gas trucks and crews around.

It’s astonishing to look at what happened in Japan and realize that they were prepared for it, very well prepared for it, and look how difficult it was for them to recover.

ACKERMAN

energybiz.com E N E RGYB I Z 13

UTILITIES’ FUTURE

It took us the last couple of hurricanes to completely figure out the right transportation flows out of the coast during those periods. Now, as you drive I-10 west of Houston, you will see signs that say “Hurricane Evacuation Route. You may use the shoulder.” You have to refine plans after every incident. The staging of gasoline and restroom facilities for people who are escaping the area — that’s huge for us as well.

SMITHERMAN

POWELSON Post-hurricane Sandy, what’s amazing is there were no failures in our bulk power system. In the PJM region, we had a couple of plants that needed to back off.

But there was no interruption of our power system. During the outage, we did two press conferences a day. We did not want to have unrealistic expectations of estimated times of power restoration. We warned our utilities about that. For those that were using social media, that real-time data was a game changer for our state.

I want to switch gears a little bit to discuss the future of generation. As state utility regulators, how do you view the importance of generation diversity, and what policies can encourage it?

ENERGYBIZ

Barry Smitherman

You have to refine plans after every incident.

I support new nuclear, 21st-century coal, shale gas, demand response and integration of renewables.

In my market, there is a dash to gas. We’ve lost close to 6,000 megawatts of vintage coal plants that did not clear in our capacity market. Our capacity market is functioning well. It’s sending a strong price signal as to what’s going to clear and what’s not going to clear. It’s actually a cleansing of the market to get inefficient generation out of the market.

The U.S. Environmental Protection Agency regulations are accelerating that replacement. Are lights going to flicker in Philadelphia and Pittsburgh because of this massive shutdown of coal? The answer is no, because we are blessed with clean, abundant Marcellus shale gas, and most of the new generation being built is combined cycle gas plants. It’s a great time for competitive markets. I would be very nervous if I was in a market that did not have the ability to bring fuel diversification to its generation fleet. That’s not our case in PJM. POWELSON

In defense of the states that are vertically integrated and rely on integrated resource planning, this planning process is probably the single most important regulatory tool we use. Oregon has renewable portfolio standards and solar capacity standards. We have greenhouse gas reduction laws, which make it almost impossible for coal to come on in our region. In our state constitution there is a rule that says no nuclear plants will be built until there’s a final solution to nuclear waste storage. Our diversity comes from the RPS. We have a lot of wind in the region and increasingly solar is coming on. Biomass is coming on. The hydro system provides a lot of backup and integration potential for wind.

Whether you want to put all your eggs in those two baskets is a serious question. But it’s one that our state is still solving in the IRP planning process.

ACKERMAN

I regulate a vertically integrated IRP state, but with access to the MISO market. What we are finding is that if you lay down the markers, the utilities innovate around the rules. It’s working.

BOYD

JONES There are four issues driving the resource mix in the future. They are innovation, reliability, greenhouse gas emissions and having a diverse portfolio. Obviously, we can’t go all the way to shale gas. We can’t go all the way to nuclear.

We can’t go all the way to wind. Which way is the right way to get the incentives right and the rate structure right and get the regulatory regime right to build these 30- or 40-year assets? I think the IRP model is best. We’re looking at least 20 years, maybe 30. Sure, we have to make judgment calls 14 E N E RGYB I Z November/December 2013

about what the price of carbon is going to be or what cybersecurity is. In addition, we have to be able to put into place rates to compensate the utilities for taking risks.

If you talk to the leaders of the utility industry who actually have to build nuclear and CCS, they are almost uniformly saying that the regulated states are where the new stuff is going to get built. It’s not going to get built in the competitive markets. Do I hate competitive markets? No. I think competitive markets are good. But they are short term in nature. They cannot take into account things like greenhouse gas reductions, cybersecurity and all these other things that affect us.

SMITHERMAN One of the problems is that when you factor in future required greenhouse gas reduction, it distorts the economics. In the ERCOT competitive market today, we are 40 percent gas, 40 percent coal, 10 percent nuclear, 10 percent wind, solar and everything else. That’s a great balanced portfolio. We didn’t intend to do that, that wasn’t an IRP. That wasn’t divined by three people sitting at the dais of the PUC. But it is a security constrained, economic dispatch model. There are times when gas is dispatched more. There are times when coal is dispatched more. But they pretty much balance each other out.

The challenge we have is keeping our existing nuclear fleet operating and keeping our existing coal plants operating. Because if you take both of those out of the mix, then you end up with only natural gas and renewables. We have no ability to store the wind or the sun and then use that power during periods when the wind’s not blowing and the sun’s not shining. The new coal plants that we have built in the last couple of years catch everything that goes up the flue stack except CO2. That’s why I think it’s a mistake to let CO2 drive the energy policy conversation in America. I’m probably in the minority among this group here, but I reflect what my state believes and what I think is appropriate.

What happens if gas prices get too high? The market response would be to build a coal plant or a nuclear plant, but nuclear will be a challenge. After Fukishima, the price of new nuclear construction is just so expensive.

There is growing concern about cybersecurity. What will it will cost to secure our energy infrastructure?

ENERGYBIZ

There is an unprecedented attempt to coordinate many different federal and state agencies around a single issue.

We are in a long-term battle with our adversaries, with the hackers, with the bad guys. But it’s also a long-term challenge JONES

We are in a long-term battle with our adversaries, with the hackers, with the bad guys.

Philip Jones

to get everybody on board on what the threat is, what the risks are, what the benefits are and then how much it costs.

ACKERMAN It’s not really a technology fix, it’s a business process fix and a personnel fix, getting your people trained in thinking and being vigilant about it and practicing responses.

There is a tendency to think that there is a technological fix to cybersecurity threats. That’s probably not there. It’s probably more a matter of how you’re thinking about things and how you organized as an entity to respond to the problem and whether you’re aware.

POWELSON We have New Jersey, Pennsylvania, Delaware, the District of Columbia and Maryland working on a quarterly basis, with state regulators, federal agencies and the industry at the table. We are trying to be proactive. We are looking for guidance from the federal government. I don’t think utilities want to have 50 different drivers’ licenses for cyber. The Federal Energy Regulatory Commission really set the ground rules, the expectations of what is on the horizon. That’s why I think many of us are now going through cybersecurity clearance. We need to know these things. Our Homeland Security state directors are involved now. It’s nice to establish that silos are being broken down. We are at least talking. Where that leads us, I am not sure right now. energybiz.com E N E RGYB I Z 15

FUTURE GENERATION 16 E N E RGYB I Z November/December 2013

Maintaining the Fossil-Fuel Option A DIV ERSE GENER ATION PORTFOLIO

BY MARTIN ROSENBERG

in coal-fired generation technology if it continues its retreat on the coal front. That would be a shame, given the abundance of coal resources in the nation, according to J. Randall Data, president and chief operating officer of Babcock & Wilcox Power Generation Group. Data recently talked with EnergyBiz about the global future of fossilfueled generation. His comments were edited for style and length.

AMERICA IS IN DANGER OF LOSING ITS TECHNOLOGICAL EDGE

What factors are driving the future of fossil fuel-powered generation globally?

ENERGYBIZ

DATA

The market drivers are fairly similar across the globe.

Economic growth ties back to electricity load growth. Emission regulations, politics, legislation and fuel prices are the main drivers of the business. If you look at Asia and the Pacific Rim — India, China and Indonesia — new coal plant building is important.

We’ve positioned ourselves with joint ventures in India and China. In fact, we’ve been in China since 1986 with our joint venture there.

How many new coal power plants do you have under way in India and China?

ENERGYBIZ

In China, it’s probably at least 10. China is going to add 30 to 40 gigawatts of new coal units per year and we participate in probably 10 to 15 percent of that market. We’re DATA

the fourth-largest supplier of new boilers for coal units in China. India is a little bit different story. While we’ve been in India for a long time, it’s been a bit slow because of multiple reasons. It will be a large market for us.

ENERGYBIZ Coal generation in the United States has fallen out of favor, and federal emissions regulations are being tightened. Is that a mistake?

DATA Coal is a natural resource that we have in this country.

It would be a shame to not find a way to utilize that resource and do it in continually cleaner ways, which the market has continually tried to do. We should be trying to utilize that resource in the most effective and efficient way for the longterm benefit of the country. With that being said, the country has never relied on one fuel source to power itself. That is as important today as it was yesterday, as it will be tomorrow.

ENERGYBIZ

What is the potential of clean coal technology?

Basically, realizing the potential means building upon our history of innovation. It means developing the most DATA

energybiz.com E N E RGYB I Z 17

F U T U R E G E N E R AT I O N

As you review the number of coal-fired units that are now being retired for economic reasons in the face of emissions regulations, do you worry that we might be cutting into some of the muscle that we need to keep power supplies viable in this country?

ENERGYBIZ

It concerns me a lot. I do look at different sources of information with respect to coal retirements. We’re going to perhaps rush further to natural gas, which history has proven can be a volatile market. Even in the last year, you’ve seen nearly a 50 percent increase in the price of natural gas from where it was in 2012. There’s a storm that’s brewing.

We all want to see the economy do better. If the economy grows, then the need for energy will grow. How the United States will be ready to handle that situation is really not clear today.

DATA

efficient steam cycles that we can in order to reduce a plant’s CO2 footprint and emissions. The next step is continued reduction of criteria pollutants, including sulfur oxides, nitrogen oxides, particulate matter and mercury. If you drift further into the clean coal side, there are things like oxy-fuel or solvents that are used to scrub CO2 gases. If you look at the history of innovations, one solution has never been the primary outcome in the energy market. As you look at those different types of technologies to address CO2, you’d have to continue to look at that as a portfolio. You can’t put all your eggs in one basket. It is about finding the right team environment with our customers and with the U.S. government to provide long-term solutions so that we can make coal more affordable and even cleaner than it is today.

From a macro standpoint, that’s a good investment for our country. The problem is that it creates a lot of challenges in the near term. Most folks want solutions immediately and believe that you can put immediate solutions on the table.

The reality is that’s not true.

When it comes to carbon capture and sequestration, the technology of doing it is fairly well-known.

It would be costly.

ENERGYBIZ

DATA I would partially agree with that. It depends on what technology you’re talking about. To your point about the cost side, it’s not necessarily the first cost associated with some of these technologies that’s going to hurt you. With oxycoal and scrubbing CO2 with solvent, the concern is with the parasitic power load that comes into play. It essentially reduces your output. They still need to be demonstrated at large power plant scale before the technology will be commercially available.

ENERGYBIZ

Parasitic load can be one-third of output.

DATA It could be as much as a third in some cases. But at the same time, we know that technologies evolve and innovation continues to occur. If you don’t invest in that portfolio, it would be hard to tell how far you can take those cycles and how you could improve on those cycles over time.

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Given the trends with the United States backing off on its commitment to coal generation technology, do you worry about U.S. technological prowess in these industries?

ENERGYBIZ

That’s really a good question. That does concern me, because you lose capabilities in the country. When you’re losing capabilities and you’re not investing in technology and innovation in a fuel source that is plentiful for us here, that is very concerning. At the same time, if you look at the power generation group as part of Babcock & Wilcox, we’ve been able to keep our hands very fresh in the marketplace because of our investments in Asia. It’s allowed us, actually, to put technologies into the marketplace more quickly and in some cases perhaps with some less commercial risk.

DATA

ENERGYBIZ How many employees do you have in the power generation group that you head up?

DATA Worldwide, we have approximately 8,000 people, including our joint ventures. We’ll continue to grow our workforce from a global standpoint outside of North America.

What is your view of the federal government’s increasingly vigorous role in regulating power plant carbon emissions?

ENERGYBIZ

There has been — if you put yourself in the seat of the utilities out there — uncertainty. Whether it’s CO2 or it’s other emissions, there’s still a level of uncertainty because of how we’ve handled emission legislation. To me, that’s quite bothersome. Clarity would help everybody. There’s a huge industrial sector out there that’s got to be able to provide processed steam and power for things that they do. Some of these industrials could really get caught, if they rush to one fuel source. Unfortunately, that’s a lesson that we’ve learned over and over again in the United States.

DATA

The Case for Coal W E NEED MOR E – NOT LESS – POW ER

BY KEITH BAILEY

to arrest the nation’s rapid movement away from the use of coal in its energy mix?

For more than a century coal has been a source of reliable and abundant energy at a very competitive price. As recently as 2008, coal-fired power plants accounted for more than 50 percent of our nation’s electricity supply. Coal and other hydrocarbons such as oil and natural gas have supported our standard of living and provided us with a substantial and sustained competitive advantage in the world economy.

When I was growing up in Wyoming, we had a coal furnace, as did most people at that time. My grandfather was an engineer on a coal-powered locomotive. But as technology evolved, coal was supplanted by diesel fuel, heating oil and natural gas. The technology and the infrastructure surrounding the production, distribution and combustion of these other fuels made them the more economical choice. This positive evolution was not a result of the sort of heavy-handed regulations that we see today, whereby economics seem to take a backseat and there is an almost theological distrust of the market’s and the industry’s ability to create constructive change.

The war on hydrocarbons is fought on many fronts, but they tend to converge at the most basic of our critical energy infrastructure, the electric power plant.

Server farms supporting our networked society have the electric power demand of small cities. An iPhone demands as much electricity over a year as a refrigerator, recent studies show. People assume that even though we use more electronic gear we are not increasing power demand. The opposite is true.

The ability to meet the mandated automobile fuel-efficiency standard requires that electric cars become a major component of our national fleet. All of this and a rebounding economy require more, not less, power generation.

WHAT WOULD IT TAKE

In spite of the obvious need to grow our economical and reliable sources of power, two elements of public policy weigh against our ability to do so.

The first element is the federal effort to close as many existing coal-fired power plants as possible, as soon as possible, and to prevent the construction of new ones. This strips our nation’s generating fleet of its most reliable and consistently economical capacity. It also ignores the fact that technological advances enable coal-fired generation to produce more power with significantly lower emissions.

Unfortunately, the economic incentives that drove the sort of research that enabled those steady technological advances to occur are chilled by the anti-coal policies we see today. And, as sure as night follows day, a similar all-out attack on natural gas production and power generation will follow.

The second element includes the state and federal dispatching mandates that force wind and solar power into the base load dispatch cycle and increasingly push coal to be the fuel for variable peak demand periods. This ignores the fact that wind and solar are the least-predictable and mostexpensive sources of electricity whereas coal is both low cost and reliable, and the plants that burn coal are designed to be baseload plants. Neither coal nor renewables are well suited to play the role they are being asked to play. Nor is the bulk of the current natural gas generating fleet well suited to provide baseload power. Much of that was designed to meet peak demand requirements and more recently to provide a rapid response as a backup to the inherent unreliability of wind and solar power.

What will arrest the nation’s rapid move away from coal?

The answer is uncertain.

An iPhone demands as much electricity over a year as a refrigerator.

energybiz.com E N E RGYB I Z 19

F U T U R E G E N E R AT I O N

It may take rolling blackouts or brownouts in large parts of the country as peak demands cannot be met because we have stripped so much coal-fired generation from the supply base. Much of our power-generating fleet today is being operated in a manner it was not designed for, which increases the risk of failure. And failure of even small facilities can cascade through a regional grid causing widespread outages. Or there may be a public outcry caused by the steady increase in the cost of power driven by the public policies just described.

But although such events might cause change, it would be for negative rather than positive reasons.

By far the best answer — the one that is needed sooner rather than later if we are to prevent these types of problems — is for both the general public and our elected officials to realize that if we continue down the path, we risk a stagnant economy by rejecting the continued use of coal and natural gas for power generation. If, however, these abundant domestic energy sources are fully utilized, it will give us the ability not only to retain our status as the world’s major economic power, but also to build on it.

If federal regulators do a true cost-benefit analysis of the regulations limiting the use of hydrocarbon fuels, we hope they will factor in the risk of failing to utilize our national advantage. We could quickly see our country move from being the world’s leading industrial economy to thirdworld status.

As history has demonstrated, that does not need to happen. Our leaders need to look beyond the current election cycle and have the courage and wisdom to develop reasonable and balanced regulation, as their predecessors did. When combined with the free market’s ability to innovate, this could produce results that achieve our collective environmental objectives while maintaining our competitive advantage.

Coal and other hydrocarbon fuels can, and should, remain a key component of our energy supply for the next century just as they did for the last.

Keith Bailey is the chairman of Cloud Peak Energy and former chairman, chief executive officer and president of the Williams Companies.

Aggregating Solar SUNPOW ER’S PATH FORWARD

BY RICHARD SCHLESINGER

to harness the sun to generate electricity: build a large, single array that might produce as much as 50 megawatts to feed directly into the grid in much the way the output of a traditional power plant would, or, install small rooftop units and use net metering to offset a homeowner’s electric bill by the amount the rooftop solar panels contribute. From the utility’s perspective, the rooftop option is really a net loss. And with a payback period of perhaps six or seven years, although that’s much shorter than the 12 to 15 years for rooftop solar installed just a few years ago, it remains a rather low-return, long-term investment for the homeowner.

But there may be a third option that, at least theoretically, could be attractive to both utilities and power customers: solar aggregation, treating several hundred or more individual rooftop installations as a single, virtual distributed generation power plant. It’s an idea being actively pursued by THERE HAVE BEEN TWO WAYS

20 E N E RGYB I Z November/December 2013

some of the larger PV manufacturers and being considered by a small number of utilities. In many ways, aggregation looks attractive. Depending on how the business model is developed, it could offset the cost of installation, help meet increasingly demanding state requirements for renewable power and help utilities take advantage of grid capacity in locations where demand is increasing. At least, that’s how the theory goes.

But as with so many virtual versions of physical realities, the question remains: Can a virtual distributed power plant meet the needs of real-life power customers and the demands of a real operating business?

Tom Werner, CEO of SunPower, a leading manufacturer of solar panels, with the largest installed base in the United States, believes aggregating individual rooftop installations is a viable way for utilities to capitalize on distributed generation. One model he suggests would have a utility own a

number of rooftop installations distributed across a radius of a couple of miles or more. The utility would compensate a homeowner either by leasing the roof or by offering especially attractive financing to install a system. “It’s a good way for utilities to quickly increase capacity nearer demand,” Werner says. The utility would in essence be building a virtual small power plant and thus offset the need to add large-scale capacity.

Two hurdles facing wide adoption of Werner’s idea are the inherent variability of any renewable source and the costs of connecting to and managing individual units on the grid. He believes aggregation could address these concerns. If the assets — rooftop panel arrays — are spread over a geographic range, perhaps as much as 25 miles, it is possible to reduce variability caused by intermittent clouds, for instance, so that it approximates demand-side variability. And the sheer economies of scale realized by installing and maintaining multiple units within a reasonable distance can cut the costs of integration with the grid.

But cost remains a significant obstacle. Wide deployment of aggregated units meant to supplement generating capacity would require heavy investment in so-called smart inverters, for instance, inverters that go far beyond the simple need to convert DC current to AC. Eran Mahrer, executive vice president for strategy and research at the Solar Electric Power Association, points out that “much wider deployment of smart inverters would be essential if a virtual plant formed by aggregating individual solar units were to provide ‘edgeof-grid’ capabilities.”

Mahrer notes that while there are locations, mainly in the Southwest, where solar in general is cost-competitive with other fuels, outside of those areas and in jurisdictions where utilities do not enjoy a very low-cost structure, solar still operates at a cost premium. As for aggregating individual units, “even with all the benefits, it is challenging to make an economic argument for distributed resources over central stations. And that includes distributed, aggregated solar, versus a single, utility-scale solar installation, not simply solar versus natural gas. The costs are coming down, and the argument might well change over the next three to eight years,” he says.

Another hurdle Mahrer sees is the need to develop and deploy much more sophisticated monitoring systems to track and control the instantaneous operation of a dispersed,

It’s not clear exactly who should be responsible for such a system and who should be compensated for it.

virtual power plant. “There are issues with telemetry, communicating back and forth with thousands of systems, characterizing them as a single resource for the benefit of the utility. And it’s not clear exactly who should be responsible for such a system and who should be compensated for it,” he says. Nor, for that matter, is it clear what the architecture of a system that involved distributed-generation, virtual solar plants would look like. Would it be owned and operated by the utility or by a large solar manufacturer, such as SunPower or Solar City? Just how would customers be compensated for use of their roofs? How would the costs and benefits of advanced telemetry systems be allocated?

Most of the challenges to the deployment of aggregated virtual solar plants are typical of the challenges faced by any new concept, whether technical or structural. The idea of aggregated solar is very new, and while there are a handful of projects that are looking at it, they are very small aggregations, according to SEPA’s Mahrer, on the order of 1megawatt. “That is what I’d call the state of the art today. They have yet to be scaled up.”

That, however, may soon change. The Los Angeles Department of Water and Power has solicited bids for a combination of a relatively large centralized solar generation facility that will be paired with a 10-megawatt aggregated system in the city of Los Angeles. Michael Webster, LADWP’s assistant director for power systems planning and development, says it’s part of the utility’s feed-in tariff program. “We’ve taken one of our large pieces of property out in the desert and said, we’ll let you build 50 megawatts out there, but the price for entry to do that is you also have to offer 10 megawatts by aggregating local rooftops. They would be responsible for finding those sites. They could target Walmart or other large warehouses or apartment buildings or individual homes, although I can’t imagine residential rooftops would be cost-effective. They would get a set price for the 50 megawatt site and a different price for the distributed sites, and it’s that price that they will be bidding on,” he said. Although Webster wouldn’t say who the bidders are, SunPower’s Tom Werner confirmed that his firm is participating.

The cost of solar, whether aggregated or not, has declined rapidly over the past few years, but like any interruptible source, it is difficult for utilities to count on it for capacity.

“We get a little capacity benefit out of solar, but not a lot,” says LADWP’s Webster. “You still need to be able to push a button and either turn on a power plant or push a button and turn off your load.” The game-changer, of course would be high-efficiency, low-cost storage. But like aggregated, virtual solar plants, the big cheap battery is still somewhere in the future. energybiz.com E N E RGYB I Z 21

F U T U R E G E N E R AT I O N

The Zero Energy Option THE BUSINESS CASE FOR EFFICIENCY

BY JAMIE J. MEYERS

design and build a carbon-neutral store? Walgreens’ net zero energy project in Evanston, Ill., is a leading example of how an organization can express its brand strategy through the built environment. As an employee of Walgreens, each day I help people get, stay, and live well, so creating a carbon-neutral project should be a no brainer, right? Conceptually, yes, but the challenges were in creating the business case, implementing the technologies needed to design and build the store, and finally operating that store to be net zero energy.

The business case was a three-part process that began by leveraging the knowledge learned from existing energy efficiency projects, such as LED lighting, hybrid geothermal, solar, wind and energy-management systems. We had implemented many of these independently, but never together. By combining all of these in one project, we were confident that we could not only reduce our energy usage, but also do it economically. We also wanted to learn from the synergies these systems might have and apply it to our existing 8,000-store footprint. The third piece to the business case was leadership. Walgreens strives to be a leader in corporate WHY WOULD A RETAIL DRUGSTORE COMPANY

22 E N E RGYB I Z November/December 2013

sustainability. This project is the first in the country to be attempted by a retail chain store, a sound demonstration of leadership. Although this store came at a premium compared with a typical store, these three elements enabled us to gain the approval to proceed.

With a concept and an approved budget in hand, it was time to execute. This turned out to be the most challenging aspect of the project. The site selected in Evanston was already slated for a new store and had been approved by the city when we hijacked the project to change it into a net zero energy project. One of the reasons we chose this location was that Evanston is very progressive when it comes to green building. We relied on this progressive stance for the changes that were needed to the original entitlements in order to construct the project. In addition, we had to keep the original opening date for the project, which gave us 14 months to design and construct the project. By comparison, a typical store takes 12 to 14 months. Lesson learned: When doing something that is brand new and uses innovative technologies, don’t constrain yourself to such a strict timeline.

Reactive problem solving can really strain project budgets.

One of the key drivers to meeting this timeline was having an integrated design team. This included the owner, the architectural and engineering firms, the energy modeling team, the commissioning agent, the general contractor, the

Imagine delivering a customer experience that’s consistent,

renewable energy providers, Walgreens’ internal tax team and the utility company. Commonwealth Edison was a great partner in assisting us on the required interconnection agreements for the wind and solar, making sure we provided the data at the proper times, as well as assisting us in choosing suppliers. Our tax team had all the information needed to take advantage of all incentives and rebates available. The general contractor helped with value engineering efforts by providing quick and accurate pricing, and the modeling team quickly determined the energy impacts of those valueengineering changes. All of this led to us starting construction at the end of March of this year.

The store is nearing completion and is targeted for a late November opening. Although all the elements of the net zero energy store are nearly in place, the project is far from done.

The operation of the store is the ultimate goal of this project, since its energy consumption will be less than the energy generated over one year of operation. Our energy models show us to be net positive, generating more than we consume, but we won’t really know until the systems start running. The commissioning process will begin on the store in mid-October, and then we will really see the fruits of our labor.

One of the biggest questions asked has been, “Is Walgreens going to do this again?” Although this store came at a premium, the lessons learned have already enabled us to make energy savings changes to new stores, including LED lighting for all new store lighting needs. We have also learned many things that we could apply to the next project, but more value engineering needs to be done to fit our financial model.

The question posed at the beginning of this article was: Why would a retail drugstore company design and build a carbon-neutral store? The answer is: We don’t know, but if you could eliminate your utility bill, wouldn’t you try?

Jamie J. Meyers is Walgreens’ manager of sustainability.

rewarding and unique for every customer you serve. Invite them to interact with you using the communications channel they choose. Send automatic notifications for payments or unplanned outages.

Reach out through social networks and mobile devices. Collaborate across your contact center and enterprise, and push information to answer questions and resolve issues quickly. Increase satisfaction and reduce churn with speech analytics and feedback management. Now imagine doing all of this with a single software platform and application suite. Multichannel, all-in-one, cloudbased or on-premise — and used in utility companies and organizations around the world since 1994 – Customer Interaction Center™ from Interactive Intelligence.

www.inin.com CONTACT CENTER UNIFIED COMMUNICATIONS BUSINESS PROCESS AUTOMATION Cloud-based or On-premise energybiz.com E N E RGYB I Z 23

Simulating a Power Collapse OPPORTUNIT Y TO IMPROV E GRID SECURIT Y

BY BRIAN HARRELL

is the largest machine on the planet and, as such, requires constant maintenance, monitoring and continuous learning. The North American Electric Reliability Corp.’s mission is to ensure the reliable operation of the bulk-power system. To accomplish this, NERC uses a variety of tools, activities and strategies to help the almost 1,900 registered entities that make up the North American bulk-power system develop dynamic cybersecurity programs.

Because the cyber environment is dynamic, NERC continues to enhance and improve cyber and physical security resources and practices. NERC does this in a variety of ways, including developing and enforcing mandatory cybersecurity standards, operating the Electricity Sector Information Sharing and Analysis Center (ES-ISAC) and providing educational opportunities to the industry. NERC also has developed security best practices and guidelines to help industry identify security issues and apply mitigation strategies.

NERC hosts events to promote security learning and practices, such as the annual Grid Security Conference that focuses on physical and cybersecurity issues, and the biannual Grid Security Exercise, a sectorwide exercise designed to test industry’s readiness to respond to a security incident.

THE NORTH AMERICAN ELECTRICAL GRID

24 E N E RGYB I Z November/December 2013

GridEx is an important event because it allows participants to check the readiness of their crisis action plans through a simulated security exercise, which in turn provides an opportunity for NERC and the industry to self-assess response and recovery capabilities and to adjust actions and plans as needed. All organizations and individuals that play a role in security response and recovery should be prepared to respond. Exercises are a key component of national preparedness — a well-designed exercise provides a low-risk environment to test capabilities, familiarize personnel with security policies and foster interaction and communication across organizations. This year’s event, known as GridEx II, takes place Nov. 13–14.

The previous GridEx, which took place in November 2011, included participants from 75 industry and government organizations in the United States and Canada. This year’s exercise expects approximately 160 organizations equaling more than a thousand participants representing NERC regions, reliability coordinators and small and large utilities across the United States, Canada and Mexico, as well as from the federal government.

The upcoming GridEx scenario, while still in the final stages of development, aims to stress the system through a series of prolonged, coordinated physical and cyber attacks.

Unlike the 2011 exercise, GridEx II will dedicate a significant amount of the scenario to physical security response and

energybiz.com E N E RGYB I Z 25

S I M U L AT I N G A P O W E R C O L L A P S E

coordination. The operational and discussion-based exercise combines operators from across North America and includes a tabletop portion for senior executives. The majority of participants will be in their normal work environments during the exercise, while the exercise control portion will take place in the Washington, D.C., area. The exercise control group will manage scenario distribution, monitor exercise play and capture response activities. GridEx is a simulated exercise and there will be no impact to the generation, transmission or distribution of electricity due to this exercise.

Participants will receive streaming videos and sequenced email messages, also called “injects,” that detail scenario conditions. Based on this information, participants will engage in both internal response measures and external information-sharing activities across the sector.

There are two levels of participation during GridEx. Organizations can be full players that participate directly in planning, dynamic exercise play and after action activities or can be monitor/respond players that engage in a more passive, less resource-intensive role.

Among goals for GridEx is the exercising of the current readiness of the electricity industry to respond to a security incident, incorporating lessons learned from GridEx 2011.

GridEx will review existing command, control and communication plans and tools for NERC and its stakeholders.

Duke Energy Florida is seeking proposals to supply approximately 1,640 megawatts (MW) of power generation beginning in 2018.

The request for proposal (RFP) will be issued on Oct. 8, 2013. Interested bidders must obtain the RFP to participate and will be required to get initial RFP information from the Web site at duke-energy.com/floridaRFP. Proposals must be received by 3 p.m. EDT on Dec. 9, 2013.

Proposals will compete with Duke Energy’s self-build option consisting of a 1,640 MW (net summer) combined-cycle natural gas unit to be located in Citrus County, Fla. The proposal will have an in-service date in 2018 consisting of a minimum of 820 MW capacity available by May 1, 2018, and the balance in service no later than Dec. 1, 2018.

An RFP pre-release meeting is planned for Oct. 2, 2013, and a meeting for interested bidders will be held on Oct. 18, 2013. Both meetings will take place from 1-3 p.m. at the Marriott Westshore, 1001 N. Westshore Bld. in Tampa, Fla. Upon completion of screenings and evaluations, a short list of proposals will be announced in March 2014. Finalists are expected to be named by May 2014 and the award announcement is planned for August 2014.

Beginning Sept. 24, 2013, additional information about the RFP will be available to prospective bidders on the Duke Energy RFP Web site at dukeenergy.com/floridaRFP. All inquiries about the RFP must be directed in writing to: DEF RFP Contact Ben Borsch Duke Energy Florida (DEF16) 299 1st Ave. North St. Petersburg, FL 33701 727.820.4781 DEF2018RFP@duke-energy.com

Independent Monitor/Evaluator Sedway Consulting Inc. 821 15th St. Boulder, CO 80302 303.581.4172 Alan.Taylor@sedwayconsulting.com

Duke Energy Florida reserves the right to revise the schedule at any time, at the company’s sole discretion, and the company may shorten or lengthen the schedule and revise the dates associated with the schedule.

26 E N E RGYB I Z November/December 2013

Another goal is to identify potential improvements in physical and cybersecurity plans, programs and responder skills.

And GridEx will explore senior leadership policy decisions and triggers in response to major grid reliability issues.

Protecting the electricity system from security threats and ensuring its resilience are vital to our national security and economic well-being. Cyber and physical threats are constantly evolving and require quick action and flexibility that come from constant vigilance and collaboration with the government and industry. NERC, the electricity industry and the governments of North America share the mutual goal of ensuring threats to the reliability of the bulk-power system, especially security threats, are clearly understood and effectively mitigated. Reviewing the security response to the grid’s critical components, such as generators, large substations and transmission lines during a disruptive, coordinated attack on the grid will help industry understand how to make the system more secure.

Information-sharing with industry and government stakeholders during the exercise will provide the ES-ISAC an opportunity to better engage subject matters experts and promote problem solving. This information exchange of simulated threats allows NERC and the ES-ISAC to analyze physical and cyber threat information for trends and cross-sector dependencies, and to identify specific opportunities for improvement. Working together during planning and exercise participation will strengthen relationships, better evaluate security incident response plans and increase the flow of critical information to the sector.

After the closed exercise, a public report will highlight the lessons learned from the exercise and identify any opportunities for improvement. The identification of strengths, areas for improvement and recommended actions that result from GridEx II will help NERC, industry and the federal government build capabilities as part of a larger continuous improvement process.

NERC continues to work with industry and the federal government to strengthen the physical and cybersecurity posture of the grid through standards development, information sharing, public/private partnerships, outreach and training, such as GridEx. Ongoing efforts in these areas will help maintain a secure and reliable grid now and in the years to come.

Cyber and physical threats are constantly evolving and require quick action and flexibility.

Brian Harrell is associate director of critical infrastructure protection programs at North American Electric Reliability Corp.

» TECHNOLOGY FRONTIER

Need for Smart Inverters INCREASING RELIABILITY // BY MICHAEL R. NIGGLI THIS SUMMER, I was proud to join with other Western Electric Industry Leaders Group members representing energy companies throughout the Western United States in calling for the installation of smart inverters on all new solar generators in the region. These simple and inexpensive devices provide the necessary voltage support for utilities to integrate intermittent renewable resources effectively and prevent costly future renovations and reliability impacts. This vital initiative will encourage the installation of more renewable energy, enabling its continued growth in a reliable manner for the benefit of the region.

The main challenge with renewable resources such as wind and solar is that they tend to be intermittent. If a cloud covers the sun or the wind stops blowing, the power output of these sources can become unavailable suddenly and indefinitely. The key, then, is to integrate them onto the grid without sacrificing reliability during unpredictable fluctuations.

That is where the smart inverters will play a vital, transformative role. These devices can mitigate both excessive voltage and voltage drops caused by fluctuating solar generation, thus preventing potential power quality problems.

However, if smart inverters are not DUKE STORAGE installed, these voltage swings can poAWARD Duke Energy announced tentially damage utility equipment and that a Texas project has residents’ home appliances, increase received an award as the top utility-scale overall cost of maintaining the grid, storage innovation. require continued installation of larger, The project involves more expensive alternatives, and could a 36-megawatt lead acid battery. It has even contribute to distributed outages. been supported by a This problem is a major concern not Department of Energy grant and Duke. only for U.S. utilities and regulators, but also has already caused the government of Germany to order a mass retrofit of smart inverters on solar installations at a cost of hundreds of millions of dollars. Our Western utilities have the opportunity to avoid this scenario by planning ahead and install-

ing smart inverters before reliability is affected on our system. WEIL Group member companies have studied this issue extensively and found significant improvement in power quality when smart inverters are placed on the system.

This change is well worth the small cost to the consumers who choose to use solar installations. For a solar installation costing $12,000, these new smart inverters will only cost about $150 more than the current inverters, approximately 1 percent of the overall cost. The $12,000 cost is based on a 3,000-watt rooftop PV system costing $4 per watt including installation. This is a bargain price, given the expensive retrofit process in Germany. In the future, the cost should be even lower as smart inverter functions become standard features. Furthermore, many of the larger solar installations have inverters with smart capabilities, which just need to be turned on to operate.

The use of smart inverters is imperative to integrating large amounts of renewable energy and realizing the many environmental benefits of these resources, while maintaining the vital integrity and reliability of the system that millions of people rely on every day.

We have the opportunity to successfully address this challenge together. We are urging all state public service commissions and legislatures to act decisively to overcome potential threats to our grid, and hence to our millions of customers. In parallel, the industry will continue to work with applicable standards organizations, such as Underwriters Laboratories and the Institute of Electrical and Electronics Engineers, to ensure that smart inverters meet electrical safety and industry standards.

By encouraging widespread adoption of smart inverters that promote renewable integration, America will have a safer, more efficient and greener energy system for everyone. This effort will allow customers, technology and renewable energy sources to come seamlessly together to create an even better, cleaner grid for our nation.

Michael R. Niggli is president and chief operating officer of San Diego Gas & Electric. energybiz.com E N E RGYB I Z 27

» TECHNOLOGY FRONTIER

Creating a Transactive Energy Framework IMPROVING RELIABILITY AND EFFICIENCY // BY RON MELTON THE USE OF DEMAND RESPONSE and other flexible distributed resources over the past decade for market efficiency and grid reliability has grown dramatically. Federal and state policy objectives point to an important role for customers’ loads, generation and storage in managing an increasingly unpredictable power system. As we consider the need to substantially scale the use of flexible distributed energy resources, there has been growing attention to the need to address not only the economics, but also the control system implications to ensure grid reliability. This has led to a focus on an area of activity called transactive energy, which is the combination of economic and control techniques to improve grid reliability and efficiency.

These techniques may also be used to optimize 28 E N E RGYB I Z November/December 2013

operations within a customer’s facility. The Department of Energy has supported the GridWise Architecture Council to develop a framework to provide opportunity for collaboration among the many stakeholders involved in transforming the power system.

In the fall of 2012, the council recognized the need for an overarching document to frame the discussions about transactive energy. This document will include definitions of terms, architectural principles and guidelines, and other descriptive elements that will provide common ground for all interested parties. Building on workshops it sponsored in 2011 and 2012, the council began to address the topic of transactive energy in a workshop portion of each face-to-face meeting. This culminated in the first International

Conference and Workshop on Transactive Energy held in Portland, Ore., in May. At the conference, the council announced plans to release the first version of a Transactive Energy Framework document in October.

The conference provided valuable input as the council created this framework. The discussions reinforced the need for clear definitions of terms as well as explanations of the technical and economic drivers underlying the need for transactive energy.

The conference also focused on the need to address transactive energy from the perspective of business and policy considerations, business models and value creation. The discussion included conceptual or reference architectures for transactive energy systems and the practical considerations and challenges in implementing such systems.

The Transactive Energy Framework is intended to address these needs. The motivations for implementing transactive energy as a new approach to managing electric power usage include requirements to support variable generation on the bulk power side, increased use of distributed energy resources throughout the system, plans for energy storage systems and the introduction of new and intelligent loads on the consumption side. Transactive energy provides a way to maintain reliability, secure the power system and increase efficiency. These multiple goals pose a multi-objective control and optimization problem. This is why transactive energy embraces economics and engineering. The same considerations outlined for the electric grid apply to building energy systems and microgrids. Building energy systems, which present intelligent loads to the electric power grid, also need MAMMOTH WIND similar economic and reliably optimized TOWERS solutions to manage energy.

SheerWind has announced it is working Asset owners, system operators on technology to and other economic entities involved in develop wind towers that will have a capacity the generation, transmission and use of 25 megawatts. of electric power all have a stake in a The company said the reliably efficient power system as envitowers will be able to accommodate six times sioned with transactive energy. There the generation of the is a clear need to align value streams largest onshore wind towers. for all these parties with incentives for participation in an actively managed system. The framework describes the dimensions and basic elements for all stakeholders and provides an opportunity for discussing how various approaches might be used to align value streams and create sustainable business models.

Regulatory, policy and business issues frame the discussion about the functional characteristics of transactive energy systems. From these characteristics the framework presents a conceptual or reference architecture illustrating the principal functional entities and relationships. The intent of this material is not to define a specific solution but to describe the transactive energy environment and to enable comparisons among various approaches.

The framework further examines the practical aspects of implementing transactive energy systems by considering the physical grid and its cyber controls.

This material is not intended to prescribe specific solutions, but rather to identify gaps and technology challenges that need to be addressed.

The council intends the Transactive Energy Framework to be a starting point for further development through engaging the broad community of smart grid researchers and practitioners. Included in the framework are definitions of transactive energy systems and attributes that may be used to describe various approaches. Examples of such descriptions are included in an appendix to the document. The council welcomes feedback on the document and invites others to describe their transactive energy work using this terminology for discussions within the growing transactive energy community.

Transactive energy provides a way to maintain reliability, secure the power system and increase efficiency.

Ron Melton is the team lead for Distribution Systems and Demand Response in the Energy Infrastructure and Buildings Division of Pacific Northwest National Laboratory and the administrator of the GridWise Architecture Council.

Gatherings// Technology Frontier Dec. 4

Shale Gas — An Unconventional Resource

London

Dec. 9-11

Intersolar China

Beijing

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

energybiz.com  E N E RGYB I Z 29

Smart-Grid Technology Critical to Electric Utilities’ Future AGING PLANTS, RISING DEMAND, SUPER STORMS AND CYBER THREATS—UTILITIES CONFRONT MULTIPLE CHALLENGES.

It’s been 10 years since cascading power outages left some 50 million people across the Northeast, Midwest and Canada in the dark. Since then, significant progress has been made to prevent or limit the scope of such events in the future.

Yet serious challenges remain. Aging systems are operating near their limits to meet the growing energy demands of today’s digital economy—which runs on electricity-gobbling computers, smartphones and server farms. Utilities are also facing pressure to integrate renewables, reduce greenhouse-gas emissions and cope with increasingly severe weather. On top of all that, they must be prepared to fend off cybercriminals.

Unfortunately, many utilities 1 are not well positioned to take on all those issues. Seventy percent of the grid’s transmission lines and power transformers are now over 25 years old, and the average age of power plants is over 30 years, according to the U.S. Department of Energy.1

The average age of power plants is over 30 years old.

THE TIME FOR GRID MODERNIZATION IS NOW. Experts say grid modernization will help address many of the problems utilities face. High-speed, lowlatency, two-way wireless communication capabilities can provide the real-time data utilities need to pinpoint problems, speed repairs, balance supply and demand and operate more efficiently. Modernization can also help accommodate renewable energy supplies and give consumers tools to better control their energy use.

In fact, according to the Department of Energy, the aftermath of Hurricane Sandy could have been worse if smart-grid technology hadn’t already been in place in some affected cities. The Philadelphia Electric Company estimated that it was able to restore power more quickly to about 50,000 customers after the storm because of its new smart-grid systems. In the Washington, DC, metro area, advanced meter infrastructure helped the Potomac Electric Power Company restore power to 130,000 homes in just two days.1

THOUGHT LEADERSHIP • SPONSORED BY VERIZON

“The number of applications that can be used on the smart grid once the data communications technology is deployed is growing as fast as inventive companies can create and produce them,” reports the federal Office of Electricity Delivery and Energy Reliability.2 “Benefits include enhanced cyber security, handling sources of electricity like wind and solar power and even integrating electric vehicles onto the grid.”

Working together, Verizon and Ambient are providing a powerful solution, Ambient Smart Grid® Nodes, which allows real-time meter information and other system data to be monitored remotely, and collected and transmitted over the Verizon Wireless 4G LTE network.

“The Verizon 4G LTE network is designed to securely carry the large volumes of data that are making the energy grid more efficient and manageable with real-time visibility into grid conditions,” says Michael Brander, vice president of sales for the energy and utilities vertical.

Verizon and Ambient also jointly developed the Open Smart Grid Communications Architecture. Launched in 2010, it’s designed to accelerate the deployment of secure smart grids, saving utilities the operational investment and maintenance cost of deploying a proprietary communications network.

The aftermath of Hurricane Sandy could have been worse if smart-grid technology hadn’t already been in place.

CYBER THREATS DEMAND VIGOROUS DEFENSE. In addition to increasing demands and natural disasters, utilities must prepare for cyber threats.

All sectors of the economy face cyber security risks, but utilities are a target with national security implications, so vigilance is critical.

In 2012, 20% of discovered network intrusions involved manufacturing, transportation and utilities, according to the most recent Data Breach Investigations Report (DBIR). The report is compiled annually by Verizon with cooperation from 19 investigating organizations around the world.

FAST FACT

20% of network intrusions discovered in 2012 involved manufacturing, transportation and utilities.

“When it comes to cyber threats, some organizations will be targeted regardless of what they do, but most become a target because of what they do,” the report’s authors write. “If your organization is indeed a target of choice, understand as much as you can about what your opponent is likely to do and how far they are willing to go.”

THE KEY TO BUILDING A SMARTER GRID With so much at stake for utilities—and for the country—public and private organizations must work together to defend against potential threats and build a more resilient grid.

With cutting-edge smart-grid technology, the largest 4G LTE network in the U.S. and deep knowledge of cyber security, Verizon is ideally positioned to be a part of a public-private team helping utilities meet the challenges of the future.

1 Economic Benefits of Increasing Electric Grid Resilience to Weather Outages. President’s Council of Economic Advisers, U.S. Department of Energy’s Office of Electricity Delivery and Energy Reliability, and White House Office of Science and Technology. August 2013.

2 Energy.gov, Office of Electricity Delivery and Energy Reliability.

4G LTE is available in more than 500 markets in the U.S. Network details & coverage maps at vzw.com © 2013 Verizon Wireless.

Discover the many ways Verizon is helping utility companies succeed: VERIZONENTERPRISE.COM/ENERGY

THOUGHT LEADERSHIP • SPONSORED BY VERIZON

» INTRODUCING

The Florida Perspective NEXTERA ENERGY’S FUTURE AMBITIONS // A CONVERSATION WITH JAMES L. ROBO

BY MARTIN ROSENBERG

From nuclear power to wind and solar generation, NextEra Energy is a leader across the utility landscape. To learn NextEra’s perspective on where the utility sector is headed, EnergyBiz recently interviewed Jim Robo, 51, the company’s president and chief executive officer. His comment’s edited for style and length, follow.

ENERGYBIZ What do you see as the future of nuclear power in your company?

NextEra has applied for licenses to build new units in Florida. What’s the status of that?

ROBO We have eight commercial nuclear power units in Florida, New Hampshire, Iowa and Wisconsin. Our company has been in the nuclear business since the late ’60s. It’s 16 percent of our generation in Florida.

Because Florida is a peninsula, the state is effectively an electricity island. Having fuel security and fuel diversity in Florida is really critical.

We built our competitive nuclear business through acquisition. Over the last decade, we have invested probably more through acquisition than any other nuclear operator in the country. We just recently invested more than $4 billion to add approximately 700 megawatts across six of our eight units. That said, nuclear is not an easy business. It’s not for the faint of heart. It is a business that has gone in cycles. Fifteen years ago it was left for dead. Several folks got into the business and bought plants for next to nothing. In the middle of the last decade it was the most cost competitive generation when natural gas prices were high.

We’re still moving forward on those. We are in the process of getting the combined operating license.

32 E N E RGYB I Z November/December 2013

ENERGYBIZ

ROBO

You are very dependent on gas generation.

ENERGYBIZ

Yes, that’s right. The mix is 78 percent natural gas and 16 percent nuclear in Florida on the FPL side.

ROBO

Do you see that 78 percent as a vulnerability that you’d like to get away from?

ENERGYBIZ

We’ve invested over $1 billion in the gas infrastructure business. We produce gas in 16 shale deposits around the country. So we have a very deep understanding of the economics of the natural gas business. We have recently announced plans to partner in the construction of a new natural gas pipeline into the state of Florida to add fuel reliability.

There is very little likelihood that natural gas prices are going to spike in the next five years. They will be low, ROBO

The most prolific gas areas in the country aren’t even being drilled right now.

Photo courtesy of NextEra Energy

in real terms, for a very long time. The technology of shale gas is getting better every day. The most prolific gas areas in the country aren’t even being drilled right now. We are looking at ways that we can hedge on a longer term for our customers’ price risk in FPL on the natural gas side. We are not really ready to talk too much QUICK FACTS about our plans there.

NextEra Energy 2012 Revenue // $14.3 billion Generation // 42,000 megawatts

Turning to your nuclear installations, are any of them merchant plants?

ENERGYBIZ

Three of our five nuclear sites are in the competitive Employees // business. Two have very long15,000 in 26 states term contracts. Our merchant Subsidaries Seabrook nuclear facility is a > Florida Power & Light large, newer plant close to Bosserves 4.6 million Floridians. ton. It’s one of the most valuable > NextEra Energy power plants in the country, but Resources and its not quite as valuable as it was five affiliates are the largest generator of years ago. But if you have a small wind and solar power merchant nuclear plant in the in North America. middle of this country, given what is going on with market rules and capacity markets, that’s a revenue stream that’s going away. Gas is on the margin in those markets.

ROBO

ENERGYBIZ Will the long-heralded nuclear renaissance take place in the next decade?

ROBO It’s going to be very challenging to see many more than just a few nuclear plants. You won’t see any built in the competitive markets at all. They will only be built in places where you still have integrated resource planning, like in Florida, to take into account the longterm perspective around what is right for customers.

NextEra Energy Resources last year installed 1,500 megawatts of wind, more than any company in the country, ever. Was that a unique circumstance, or do you think that’s going to be replicated in the future?

ENERGYBIZ

We have historically been the leading renewable energy provider in the country. We’ve been in the renewable business for more than 20 years. We have, almost every year, been the number one developer in the country. We’ve said that over the next two years we already have 1,000 megawatts ready to be built. We could get as high as 1,500 megawatts and maybe even do a little bit better over a two-year period. This year is going to be very low.

Next year could rival 2012 in terms of additions.

That’s due to the cycle of the production tax credit extension. Last year, the PTC expired at the end of the year. Customers in 2011 were rushing so they ROBO

energybiz.com E N E RGYB I Z 33

» INTRODUCING could get the power projects ready by the end of 2012, prior to the expiration.

The PTC was extended early in 2013. That extension says you need to start construction by the end of this year, rather than be finished with the project. So for practical purposes, the PTC expires next year. You see a lot of contracting going on right now for delivery for next year. The market is very strong. With wind and solar, equipment prices are getting better.

Do you think solar’s day will arrive where it’s going to reach parity with wind?

ENERGYBIZ

ROBO Solar will never be competitive with wind in North Dakota, Oklahoma or Kansas. In California, solar is already more competitive than wind is. In Arizona, you are really better off doing solar than you are wind. And in Hawaii, solar is more competitive than wind. So it depends on the market. By the end of this decade, solar will be cost competitive.

Some policymakers would like solar investments to be classified as real estate investment trusts to attract more investment dollars.

What is your view?

ENERGYBIZ

There’s talk about making renewables qualify for master limited partnerships. A lot of folks, both in wind and solar, are looking at the REIT structures. If you tell me what’s going to happen with tax reform, I’ll tell you whether renewable REITs are a good idea or not. There is a good chance that at some point renewables will become qualified for MLPs going forward.

That won’t be a replacement for the PTC. The passive tax loss rules probably aren’t going to be changed.

Renewable projects generate tax losses because of bonus depreciation and five-year MACRS depreciation. Those projects really only make sense for an MLP after the PTC is rolled off after the 10 years.

ROBO

What has NextEra done on the efficiency front?

ENERGYBIZ

ROBO Florida’s load growth has been better than most. But despite the fact that load growth hasn’t been terrific, we’ve invested aggressively in Florida and our customers’ bills are actually 16 percent lower than they were five years ago as a result of all of these investments that we’ve made.

ENERGYBIZ

What are your capital expenditure plans?

ROBO We have $15 billion of capital spending that has either been approved by regulators or we have contracts signed for it on the competitive side. We 34 E N E RGYB I Z November/December 2013

expect to grow to about $24 billion over the next four years. We expect to spend $6 billion a year. We have one of the largest capital programs of any Fortune 500 company. We’re spending on storm hardening.

We proposed a new gas pipeline into the state of Florida that we are going to be investing in, contingent on the approval of our regulators. We have a big reliability investment program.

ENERGYBIZ

What reliability initiatives are under way?

In any given year, the odds of a major hurricane hitting South Florida are something on the order of 25 to 30 percent. We run drills every year. We position inventory and people, fuel oil, poles and transformers ahead of storm season to make sure that we have excess inventory on hand.

Then we’ll burn that down over six months and then reposition it prior to the next summer. We are inspecting every wood pole in our service territory. We have replaced tens of thousands of wood transmission and distribution poles. We have spent hundreds of millions of dollars on what we call storm hardening of major feeders in our service territory.

ROBO

We see about a 30 percent improvement in reliability on an ongoing, dayto-day basis.

Do you think that mitigates the need for microgrids and distributed generation?

ENERGYBIZ

Yes. We are in the process of getting state regulatory approval of plans to spend an incremental $400 million on storm hardening over the next three years on top of the $100 million a year we were already spending. We want to accelerate our efforts and harden every feeder in our network that is above ground. We have about 3,400 feeders and 1,000 are underground. In the places that we’ve hardened already, we see 50 percent fewer outages as a result.

We see about a 30 percent improvement in reliability on an ongoing, day-to-day basis.

ROBO

What is the future of electric vehicles in your territory?

ENERGYBIZ

We love electric vehicles. We are doing whatever we can to support them. Our networks are already set up to support a very high penetration of electric vehicles.

ROBO

ENERGYBIZ

Where do you see smart grid headed?

We were one of the leading companies in the country on that. We are in the final steps of finishing deployment of smart meters for 4.5 million of our customers. We’ve gotten tremendous benefits from it.

Part of our big reliability effort is to put more smart grid intelligence into our network. Smart meters are going to be able to help us better with storm response.

ROBO

ENERGYBIZ

NextEra is blessed with low power rates.

Our rates are 25 percent below the national average. FPL has the lowest typical residential bill in the state.

ROBO

ENERGYBIZ How does that affect your ability to experiment with energy efficiency and time-of-day rates? Do customers care?

It’s much tougher to make energy efficiency programs hot when you have low-cost electricity.

There is not a utility in the country that has lower operating costs. We have a focus on staying low cost and being fuel-efficient. If we can deliver low rates to our customers, we’ll continue to. We have a big energy efficiency program. We spend $200 million a year on it. It’s one of the biggest programs in the country.

ROBO

ENERGYBIZ How does NextEra approach grid security?

ROBO We have tried to stay ahead of the curve in cybersecurity for the grid. Our annual spending on cybersecurity this year is six times what we spent in 2006. We spend a lot of time as a senior team reviewing our plans for cybersecurity. We are spending a lot of time working closely with the U.S. government and with Edison Electric Institute on cybersecurity. The U.S. government has been reluctant to share what the threats are with the industry. Until the U.S. government is going to be able and willing to share really what those threats are, and also to share some of the best technology that they have to fight those threats, the industry is going to be at a disadvantage. The White House understands that. We take cybersecurity very seriously at our company. We are working very hard to make sure that we protect, through multiple layers of defenses, our most critical assets. If somebody is going to attack the grid, the nerve center of the country is where you need to be most concerned.

I worry a lot about cybersecurity, but I worry more about hurricanes.

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

2.

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

Date of filing: September 28, 2012.

Frequency of issue: Bi-Monthly.

No. of issues published annually: 6.

Annual subscription price: Not Applicable.

Complete mailing address of known office of publication (not printer): Energy Central, 2821 S Parker Rd., Suite 1105, Aurora, CO 80014. Contact Person: Kendra Branch-Brett, Telephone: 303-782-5510.

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

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

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

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C. Total paid and/or requested circulation (Sum of 15b(1), (2), (3), and (4)): Average no. copies each issue during preceding 12 months, 19,087. Actual no. copies of single issue published nearest to filing date, 19,047.

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

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Actual no. copies of single issue published nearest to filing date, Not Applicable.

4. Total Nonrequested Distribution (Sum of 15d (1), (2) and (3): Average no. copies each issue during preceding 12 months, 2,372. Actual no. copies of single issue published nearest to filing date, 2,338.

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Actual no. copies of single issue published nearest to filing date, 125.

H. Total (Sum of 15f and g): Average no. copies each issue during preceding 12 months, 21,529 I. Percent paid and/or requested circulation (15C divided by f times 100): Average no. copies each issue during preceding 12 months, 89%. Actual no. copies of single issue published nearest to filing date, 89%.

16. Publication of Statement of Ownership is required and will be printed in the Nov/Dec 2013 issue of this publication.

17. Signature and Title of Editor, Publisher or Business Manager, or Owner: Steve Drazga, CEO, Date: September 27, 2013.

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

energybiz.com E N E RGYB I Z 35

» LEGAL ARENA

A New Framework for Strategic Planning REGULATIONS AND BUSINESS MODELS // BY DIAN GRUENEICH STATES WILL SEE MORE CHANGES in their electricity systems over the next 15 years than they have in the past half century. And leading states, such as California, are embarking on an unprecedented effort to rapidly and fundamentally change their electricity supply and delivery systems. New systems that are driven by renewable and distributed power of all sizes and technologies, owned by customers, utilities, and third parties alike, are being put in place.

An overlay of demand-side resources and new information technology is likewise expanding.

Although much commentary has focused on the technological and economic aspects of these changes, little attention has been paid to a fundamental question: Are the traditional electric system regulatory and utility institutional structures sufficient to support this transformation? And, if not, what changes are needed?

Last year, I co-authored a paper, “Renewable and Distributed Power in California: Simplifying the Regulatory Maze — Making the Path for the Future,” for the Shultz-Stephenson Task Force on Energy Policy at Stanford University’s Hoover Institution that addressed these questions, specifically in the context of California. We focused on California because of its aggressive renewable and distributed generation goals, its multitude of programs to achieve those goals, its complex regulatory structure, its outdated rate design and its largely non-incentivized utility business model. Our paper concluded that an ambitious scale-up of utility-scale renewables and distributed power systems requires an equally ambitious structural reform in the existing regulatory framework and the traditional regulated utility business model.

Subsequent discussions have confirmed that the challenges extend beyond renewables, are faced by 36 E N E RGYB I Z November/December 2013

many states and are increasing as stakeholders grapple with planning beyond 2020. I am now working with Stanford University’s Task Force on Energy Policy on a paper that will propose an updated framework for strategic electricity planning. The focus of these efforts is to encourage policymakers, utilities, consumers and stakeholders to address the need to update and streamline the regulatory planning and decision-making framework.

Institutional change is as challenging as physical change. However, without an update to the institutional policymaking framework, efforts for the physical and digital transformation of the electric grid will falter and possibly fail.

Our work recommends an updated policy and governance framework so that state policymakers can more effectively address the transformational changes needed for their states’ electricity systems. Although our approach is tailored for California, the proposals summarized below can be used wherever the energy system is moving forward.

Proposal 1 // Use an integrated framework focused on reliability, affordability and sustainability.

The transformation of states’ electric systems requires billions of dollars of investment, partially governmental but mostly private. To achieve a successful outcome, we propose an integrated planning framework that analyzes policies, programs and scenarios using consistent and comprehensive criteria focused on the most important features of a viable electric system: reliability, affordability, and sustainability.

Proposal 2 // Integrate climate, water and transportation goals and programs with the state’s electricity future.

Until recently, electricity regulation occurred in relative isolation, focusing on developing and delivering

power at reasonable rates. Climate change and many states’ commitments to reducing GHG emissions, however, have dramatically changed this historical approach. Legally and practically, energy, climate, water and transportation are intertwined. Although this linkage is recognized, a stronger approach is necessary, one in which the state’s climate, energy, water and transportation programs are developed within an integrated framework.

Proposal 3 // Develop three key tools for strategic energy planning: advanced analytical modeling; an integrated electricity, climate, water and transportation vision COMPETITION and action plan; and regulatory harmoREJECTED nization and streamlining.

The Arizona Corporation Commission is getting Major advances are needed in statea mixed response to level energy modeling capabilities. a decision to reject calls for retail electric States need the capability to examine competition, according future scenarios across a range of asto the Arizona Daily Star. sumptions. This analysis can explicitly Increased electric competition was optimize reliability, sustainability and embraced by some affordability objectives in the energy major power users. sector and cross-sectors, and identify trade-offs and synergies. Absent such tools, states may pursue policies and programs that will waste money or not provide needed results.

Using this scenario planning capability, a state can develop a single road map that integrates policies and programs within and between agencies. The road map should present a plan for the state’s electricity transition using a framework focusing on reliability, affordability and sustainability. It should include specific links for integrating the state’s electricity future with climate, water and transportation goals.

Looking at the challenges of developing a strategic electricity planning framework, it’s apparent that there needs to be a harmonized and streamlined regulatory structure in order to avoid balkanized energy governance and policies. Integrating programs on the demand side with those for renewables, natural gas and storage is essential. Work must also focus on updating the key tools of regulation: rates, cost allocation and utility business models.

We don’t know what issues may come up in the next 30 to 50 years. But if the regulatory process and the tools used by state policymakers are implemented so that issues can be addressed quickly with coordination, with adequate analytical tools and within a consistent framework, then the United States will be able to achieve the electric future it needs.

Dian Grueneich is commissioner emeritus of the California Public Utilities Commission.

energybiz.com E N E RGYB I Z 37

» LEGAL ARENA

States Continue to Lead AFTER 125 YEARS, STATES ARE CONTINUING TO LEAD // BY COLETTE HONORABLE THIS IS AN OPPORTUNE MOMENT to reflect upon what our nation has achieved without a comprehensive national energy policy, thanks to the great work done at the state level.

Let’s be clear. States have not done all the hard work. Our federal colleagues in Congress, the regulatory agencies and the courts have played a critical role. But sometimes we forget how much we’ve accomplished without a national energy blueprint.

As state partners, we are committed to ensuring the safety of the natural gas pipeline infrastructure, developing renewable energy, siting transmission lines, shoring up the physical and cybersecurity of our nation’s utility assets, and developing innovative energy efficiency policies. We also work with the energy industry to make certain utilities can provide sufficient energy supply, keep the lights on and the gas flowing during extreme weather events.

Our federalist system of government puts those who know our citizens best — state and local governments — in charge of addressing issues at these levels.

This has allowed us to adopt new regulatory programs, such as pipeline replacement programs, energy efficiency, and renewable energy efforts, at the state level first so we can see what works and what does not.

Renewable energy development has flourished, thanks in large part to state leadership. There is no

Gatherings// Legal Arena Dec. 5

European and National Energy Policy

London

Dec. 9-11

Health and Safety in Offshore Wind

Breman, Germany

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

38 E N E RGYB I Z November/December 2013

cookie-cutter approach, and thus, we’ve seen the majority of states adopt diverse renewable portfolio laws with many unique characteristics. Some states, such as Texas, have taken a market-based approach, while others prefer a regulatory paradigm, utilizing feed-in tariffs and other mechanisms. The results are profound. Renewable energy usage grows each year, making our electricity system cleaner and more efficient. Federal investments and tax credits help, but state leadership remains the key driver.

None of this development would matter if there were no way for companies and utilities to bring their product to market. Thus, I am proud of my colleagues’ record for siting necessary transmission lines.

States have also led in the regulation TVA ADVISORY of the production of oil and gas in this GROUPS country. Sstates have taken the lead The Tennessee Valley Authority has formed in ensuring the safety of water quality, two advisory groups prudent water disposal and other isfor guidance on how to respond to changing sues involving the drilling and hydraulic power markets, fracturing process. In addition, states according to the Chattanooga Times have led the way in making certain that Free Press. transportation and distribution of natuOne panel will look into how to best balance ral gas within our borders is in accorreliability with energy dance with the law. In fact, many state efficiency and clean energy technology. A laws exceed federal requirements. This second group will advise crucial inspection and law enforceTVA on its planning for power growth in the ment effort has been strengthened by next decade. the work of the National Association of Pipeline Safety Representatives, which is comprised of state inspectors.

NARUC is celebrating its 125th anniversary. I am honored to be its incoming president. Despite all we’ve achieved, states can’t do this alone. We’ve learned from one another, and we continue to adopt mechanisms that make the system run better for the consumers we serve. I believe the best is yet to come.

Colette Honorable is incoming president of the National Association of Regulatory Utility Commissioners and chair of the Arkansas Public Service Commission.

» FINAL TAKE

A researcher shows a prototype solar panel at the Fraunhofer Institute. Photo courtesy of the Fraunhofer Institute.

Make Mine Red COLORS AND UNIQUE DESIGNS TO BOOST SOLAR APPEAL // BY REINHOLD PABST THE STANDARD BLACK AND BLUE solar panels generate electricity but lack the aesthetic flexibility that architects and building owners crave.

Consequently, the possibilities have been limited when it comes to adapting solar installations to conform to the wishes of designers, architects or customers.

The market only offers modules in a uniform and homogenous color or with semi-transparent surfaces. But now, with the help of a transparent conductive oxide (TCO) layer, researchers can turn solar façades into colorful and artistic creations in order to beautify urban life.

Depending on a customer’s needs, building integrated photovoltaic could be used to either enhance a building’s aesthetics or to attract very little attention.

The Fraunhofer Institute for Applied Optics and Precision Engineering in Jena, Germany, is preparing for market entrance while refining its production process. This promising industrial application is the result of extensive research.

Institute physicists together with scientists from the Friedrich-Schiller University in Jena have spent four years focusing on nanostructured black silicon, as well as cost-effective techniques and manufacturing processes to increase design flexibility. They have learned how to make colored solar cells without significant loss in cell efficiency.

This new techniques will be particularly suited to creating colored solar designs for decorative façades and domestic roofs. A transparent conducenergybiz.com E N E RGYB I Z 39

» FINAL TAKE

A sketch showing what a building in Stuttgart, Germany would look like with a facade using new solar technology.

Photo courtesy of the Fraunhofer Institute.

tive oxide conducts electricity. This layer has a lower refractive index than silicon, so it works as an antireflective coating.

The color comes from changing the optical thickness of the transparent conductive oxide layer. This use of innovative coating materials for shaping solar cells is a pioneering approach. Indium tin oxide is the most common material used today, but it is expensive.

The IOF laboratory is working on how to use cheaper zinc oxide with added dopants. The TCO layer has little effect on the current yield.

Simulations showed that the efficiency of designed solar cells could be more than 15 percent. Thus, solar cells and modules can be created in almost every color of the light spectrum without losing losing performance. Consequently, integrating innovative energy concepts into new buildings is no longer necessarily linked to uniform or inefficient modules. In contrast to thin film technologies, silicon solar cells processed with a TCO outperform in terms of efficiency and are available in a variety of possible colors.

In practice, the efficiency depends on the design of the solar panels and the direction the building faces.

But not every color allows you to generate the same amount of electricity. There are restrictions for example with certain blends of red, blue and green.

Researchers in Jena are also developing an inkjet printing process to contact the conductive TCO later on the silicon wafer. This will make manu40 E N E RGYB I Z November/December 2013

facturing faster and allow additional degrees of flexibility in design.

Apart from these new opportunities to vary the color of solar cells, efficient design modules could even be used to set up large photovoltaic billboards or street lanterns. In combination with LEDs a module would produce its own electricity to highlight brand names or artistic pictures. This enables these solar panels to be used for marketing and advertising purposes. Additionally, solar cells that are already implemented in cars or other gadgets could now be designed in a corresponding color to create an integrated look.

Reinhold Pabst recently was a co-winner of a “German High Tech Champion” green buildings competition sponsored by the German Federal Ministry of Education and Research.

» ADVERTISER INDEX Company

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Black & Veatch

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Energy Biz Leadership Forum

5

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Interactive Intelligence

23

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Lockheed Martin

1

www.lockheedmartin.com/ energysolutions

Quanta

back cover

www.quantaservices.com

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inside back cover

www.utilityanalyticssummit.com

Verizon

30-31

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