By Michael T. Burr

UPDATE: Friday, May 7, 2010:

Cape Wind just signed a 15-year contract under which National Grid will purchase 50 percent of the wind farm’s output — including electricity and renewable energy certificates “and other potential market attributes.” National Grid agreed to pay a tariff that starts at 20.7 cents a kilowatt hour and escalates at 3.5 percent each year, assuming federal tax incentives remain in place.

If the Massachusetts Department of Public Utilities approves the contract, National Grid expects it will add $1.59 to customers’ monthly bills. The deal is expected to satisfy the utility’s state-mandated requirement to procure 3 percent of its total electricity supplies from renewable sources.

Whether the DPU will approve the deal remains to be seen. The Rhode Island PUC recently balked at the price tag of a similar deal that would’ve had National Grid buying power from a different offshore wind project for 20 years starting at 24.4 cents per kWh.-MTB

ORIGINAL APRIL 21 POST:

This message from National Grid just hit my inbox:

>>

Please find enclosed a statement from Tom King, president, National Grid, on today’s historic decision by U.S. Secretary of the Interior Salazar on the Cape Wind project and the status of National Grid’s negotiations with Cape Wind on a power purchase agreement:

“We congratulate Cape Wind on the approval of its project.

Secretary Salazar’s decision marks an historic step forward for energy policy in the United States, our region and the Commonwealth of Massachusetts. State and federal renewable goals can only be met with an open-minded attitude to energy alternatives. This bold step by the Obama administration sends a signal that the United States is serious about securing its energy future and is willing to take action to make that happen.  We also applaud the vision of the Patrick administration in recognizing the critical importance of this project to the state, the northeast and the nation.

National Grid is a long-time advocate for the development of renewable energy sources as a means to mitigate climate change, increase domestic energy supplies, and benefit customers and communities by providing a cleaner, more secure energy future.  That is why we have been working to negotiate a power purchase agreement with Cape Wind.  Our negotiations are going very well and we are optimistic that we will have more to say about our progress in the near future.”

>>

Posted: April 28th, 2010 under energy policy, green energy, renewable energy credits, renewables.
Comments: none

By Michael T. Burr

If you were following @FortnightlyMag on Twitter last week, you saw a stream of tweets in real time from Accenture’s International Utility & Energy Conference in Tyson’s Corner, Va. Below is an edited selection of those tweets, most of which are paraphrased quotations from the speakers indicated.

Gen. Colin Powell, former U.S. Secretary of State (April 20, 2010)

-Energy is the second most powerful force. The free exchange of ideas is the first. 1:27 PM

-Openness and democracy is the greatest weapon America has. 1:14 PM 

-China won’t become America’s enemy because they’re doing too well by being our partner. 1:25 PM 

-In my judgment and that of Kleiner Perkins, cars in America are moving to electricity. It’s a solution that makes sense. 1:03 PM 

-Fuel cells have a unique military application. #bloomenergy 1:55 PM 

-Fuel cells are a breakthrough. Think of them like cell phones. #bloomenergy 1:54 PM

-We need to be careful not to focus so much on terrorism that we forget what we can accomplish. Keep moving forward. 1:40 PM

Ray Kurzweil, inventor and futurist (April 19, 2010)

-People tend to disregard new technologies in the early years of logarithmic growth. 8:50 AM

-Exponential growth in IT is transforming every industry. Every industry will be an IT industry. 8:07 AM

-Nanotechnology is inherently an information technology, subject to exponential growth. 9:20 AM

-Solar and storage are the energy technologies that depend on nanotechnology, and they follow the law of accelerating returns. 10:40 AM

-The cost per watt of photovoltaic cells is a function of nanotech progress. 9:20 AM

-Solar energy production doubles every two years. In five years solar will reach the cost-per-watt crossover point and will be cost-competitive with the alternatives. 8:15 AM

Electricity storage is a bit behind solar. It’ll be eight to nine years before storage is cost effective. In 10-20 years, it’s a whole different landscape. 11:24 AM

-Decentralized power networks are inherently more stable than centralized networks. 8:35 AM

-We’re destroying jobs at the bottom of the skill ladder and replacing them with eight times as many at the top. 8:48 AM

Jonathan Silver, DOE loan program executive director (April 20, 2010)

-Government loans should finance technologies that private financing doesn’t support. When private financing comes in, DOE should get out. 7:55 AM

-The worst thing for private financing isn’t a bad set of rules; it’s uncertainty about the rules. 7:58 AM

-Clean tech investing is the driver of the VC industry today. 8:01 AM

-[On Fortnightly’s question RE: FutureGen status and plans:] Expect progress. Next question? 8:15 AM

Andy Karsner, former DOE Under-Secretary (April 20, 2010)

-Durable price signals are the most effective remedy for ‘capital constipation.’ 9:28 AM

-DOE has lost its focus on R&D toward scalable techs and is displacing private capital. 8:49 AM

-Congress has two approaches to policymaking — do nothing or overreact. 8:33 AM

-Congress is more likely to legislate energy policy in reaction to a crisis than it is to legislate with thoughtful deliberation. 8:35 AM

-”No policy” is a lot cheaper than “bad policy.” 8:46 AM

-The official US position on oil price policy is we don’t know and it’s out of our control. 9:12 AM

Andy Serri, Ameren (April 20, 2010)

-In Washington, the loudest party, the last to speak, rules the day. Subject matter experts aren’t in the room. 8:54 AM

Hugh McDermott, Better Place (April 19, 2010)

-As long as EV batteries carry a price premium, we will take that out of the equation w/ leasing. 3:27 PM

Mark Case, Baltimore Gas & Electric (April 19, 2010)

-BG&E’s “no losers” rebate program nets the same peak reduction as critical peak pricing and gives 100% of customers immediate benefit. 2:47 PM

-Peak rebate program will save customers $1,500 each over the 15 year meter lifespan. 2:44 PM

Chris Colbert, UniStar (April 19, 2010)

-We haven’t started construction yet and Calvert Cliffs is already big: $600 million just for permitting & licensing. 1:02 PM

-You have to convince yourself you’re not building just one reactor, but three or four. 1:35 PM

-We’re not just building a project; we’re building up the whole nuclear industry again, including the NRC. 1:30 PM

Gautham Chandra, Washington Gas Light (4/19/2010)

-We try to position ourselves to be the lowest cost platform to bring the best technology solutions to market. 10:49 AM

-The regulatory tide is moving gradually toward DG and distributed control of the grid. 11:27 AM

A.R. Mullinax, Duke Energy CIO (4/19/2010)

-We’re hedging our bets, investing in all the emerging solutions. 10:45 AM

-Once you break the electricity storage barrier, everything changes. 11:18 AM

Arthur Hanna, Accenture (4/19/2010)

-About 51% of US consumers say they don’t trust energy companies to make correct decisions to address US energy challenges. 9:33 AM

-… Yet 2/3 say the industry is responsible to solve energy problems. 9:35 AM

-The energy industry has a responsibility to take charge of educating consumers. If they don’t trust us, they’ll trust someone else. 9:48 AM

Geoffrey Colvin, Fortune magazine (4/19/2010)

-The most successful companies are very good at creating new solutions for customers’ new problems. 10:22 AM

Posted: April 26th, 2010 under Current News, R&D, Uncategorized, climate change, dynamic pricing, finance, geoengineering, green energy, investment banks, natural gas, renewable energy credits, renewables, smart grid.
Comments: none

By Courtney Barry for Fortnightly’s PUB - Public Utilities Blog.

Word from Wall Street: Don’t overload on solar and wind.

According to the April 6, 2010, BofA Merrill Lynch Global Research report Alternative Energy Perspective, investors are changing their aim “to look beyond wind and solar as opportunities broaden…Venture capital investments are becoming less solar-centric… [S]mart grid/energy efficiency provided the greatest number of deals in the quarter.”

That trend is echoed by the Cleantech Group of San Francisco, which provides updated industry market statistics on clean technology. While wind and solar PV project markets continue growing, due to extended tax credits, private equity and venture capital investing is a different story.

“Solar VC investment is a shadow of what it formerly was,” said Dallas Kachan of Cleantech. The firm shows that solar has fallen from its position as undisputed top sector for venture capital investment, which it held over much of the last few years, and now isn’t far off its three-year lows ($322 million in 27 deals). Kachan noted that comparable analysis for wind investments is difficult because wind receives an insignificant percentage of venture capital.

Meanwhile, smart grid and energy efficiency venture capital investments are on the upswing for the 1^st quarter 2010. “We saw 11 venture investment deals in the first quarter of 2010 in smart grid,” Kachan said. “The total invested was $53 million. And we saw $217 million invested in the first quarter of 2010 into the energy efficiency category for a total of 39 deals.”

Some recent smart-grid private equity deals noted by Cleantech include KLG Systel of India, which provides solutions for IT and currently implements a real-time energy management system for one of India’s largest cement companies; and Daintree Networks, a U.S. company that provides wireless control solutions for commercial buildings. The top three energy-efficiency placements involved Lemnis Lighting of the Netherlands, specializing in sustainable lighting based on led technology; Wuhan HC Semitek, a Chinese high-tech company that manufactures and sells blue and green LED chips; and Luminus Devices, a U.S. manufacturer of solid state lighting for various illumination applications, including PhlatLight LEDS.

Why the trend? “There has been a tremendous amount of capital put into solar,” said Jeffrey Lipton, a managing director with investment bank Jefferies & Co. “A number of high profile companies got funded over the last three to five years, raising anywhere from $250 million to $1 billion dollars in private capital, and they haven’t reached large scale production yet — which is a very different type of proposition for private investors than what they’re used to.”

Moreover, PE and VC firms have been investing less money in wind energy recently, viewing the sector as more mature and consolidated than solar. “The investment in wind has been more around project or wind farm development, so the challenges are a bit different than solar, where names like Nanosolar, Miasole, Solyndra, etc., have each raised several hundred million dollars and still have not reached large scale commercial production.”

Compared to solar, investors view energy efficiency and smart grid opportunities as less risky and faster to bear fruit. They need less capital and have much shorter payback periods for customers in many instances, Lipton said. “Smart Grid is a different kind of investment because you don’t need to spend several million dollars to build the first plant. And people see energy efficiency as an attractive return-profile business, so that’s why there’s a focus on that. It’s a lot easier to use less energy than to build new capacity.”-Courtney Barry for Fortnightly’s PUB

Posted: April 26th, 2010 under Uncategorized, efficiency, energy policy, finance, green energy, renewables.
Comments: none

In energy policy discussions, one topic almost never comes up — nuclear fuel shortages. But in a recent Scientific American blog post, Davide Biello points out that a wave of new nuclear plants will dramatically increase demand for uranium. Biello suggests that while reprocessing might become an important part of a weapons-reduction effort, it also might be necessary to expand fuel supply enough to attract investment in new reactors. He writes:

Reprocessing may reduce the demand for fresh uranium fuel. Although various estimates catalog known uranium reserves capable of fueling the existing global fleet of 440 reactors for at least 100 years, the growth in demand for new reactors in China, the U.S. and elsewhere might change that equation. “If we build 200 to 400 more reactors, then it’s definitely only 100 years of supply,” argues [Alan] Hanson, whose company [Areva] is the largest supplier of uranium fuel in the world. “Would you build a nuclear power plant with a 60-year lifetime with only 100 years of supply? I wouldn’t if I was an investor.” 

Posted: April 15th, 2010 under energy policy, finance, green energy, nuclear renaissance.
Comments: none

On the heels of high-profile lawsuits alleging new smart meters caused over-billing, one of Texas’s major energy retailers seems to be capitalizing on concerns about so-called “variable-rate” plans.

On April 5, TXU Energy revamped its website and rolled out a new brand, “TXU Energy Texas Choice.” As part of the facelift, the company emphasized its offering of fixed-rate plans, including a “Texas-only” wind option — which the company says will provide energy from wind power sources located only in the state of Texas. The retailer also offers customers hedging arrangements to lock in their power price for up to two years.

According to a TXU Energy spokesperson, the company eliminated the last of its variable-rate plans last October. Amid growing controversy around smart meters, dynamic rates and unexpectedly high electricity bills, TXU Energy’s April 5 rebranding effort emphasizes price stability and customer control. But by describing competitors’ plans with the Texas-specific legalese “variable rates,” TXU Energy’s marketing approach seems to capitalize on customers’ worries about uncertain bills.

“[Y]ou may only learn about [changes in a variable rate] when your bill arrives,” TXU’s website states, “after you’ve already used the electricity at that higher rate! … Our plans have straightforward pricing with transparent terms that you can understand, because we believe that a well-informed customer is a customer for life.”

TXU Energy is offering at least two types of dynamic pricing programs structured in ways the company says will avoid the drawbacks of Texas’s problematic “variable” rates. Indexed plans, for example, are tied to fuel prices. And the company’s time-of-use (TOU) rate plan — only available to customers outfitted with smart meters — charges two different fixed rates for on-peak and off-peak usage. TXU spokesperson Sophia Stoller told Fortnightly TXU distinguishes its dynamic-pricing plans from variable-rate plans by informing customers in advance about any possible changes in their rates and providing the opportunity to switch plans at any time.

“We have a detailed, comprehensive website where customers can see prices in real time and can inquire about why the current price is what it is,” Stoller said of the company’s fuel-price indexed plans.  “We give customers all the information they need so they can make an informed decision. Customers can change their rate plan at any time. It’s a month-to-month plan.”

TXU’s marketing effort arrives just as Texas distribution company Oncor faces a class-action lawsuit in Dallas district court alleging the company’s smart meters overbilled customers as much as 300 percent. Oncor acknowledged some billing errors — including human errors relating to reading electromechanical meters before installing new smart meters — but says most of the bill increases were attributable to increased electricity use during a cold snap. The lawsuit and public outcry prompted the Public Utility Commission of Texas to hire Navigant Consulting to independently test the state’s smart meters and back-office systems.

The controversy exemplifies the importance of effective consumer education as utilities roll out smart metering and smart pricing. In a recent study of dynamic pricing programs, commissioned by FERC and submitted to Congress, researchers found customer education was a key factor in program success. Ahmad Faruqui, one of the FERC study’s authors at the Brattle Group, offered the following comment (along with the caveat that he hadn’t thoroughly examined TXU Energy’s plans):

“If the headline is taken at face value, it appears that this is not a forward-looking development. It will perpetuate inter-customer subsidies that have been around for the past century, where poor load-factor customers living in big homes with every conceivable creature comfort are subsidized by high load-factor customers living in smaller homes on lower incomes.

“In addition, if this trend toward fixed-rate pricing is embraced by other retailers in Texas, it will eliminate the opportunity to incent customers to reduce peak loads and lower energy costs, which have been highlighted in the FERC study. That would be ironic since Texas operates what most people regard as the nation’s most competitive electricity markets.

“Most of the concerns that have been highlighted in the popular press have centered on smart meters, not on dynamic pricing rates. Indeed, even in Bakersfield where the smart metering problems have captured the headlines, people forget that several thousand customers have volunteered onto dynamic pricing rates and saved on their utility bills.”

Faruqui concluded, “The ideal approach to rate design would be to offer customers a menu of rate choices and to anchor those choices on dynamic pricing, not flat-rate pricing.”-Michael T. Burr

Posted: April 6th, 2010 under Uncategorized, dynamic pricing, renewables, smart grid.
Comments: 3