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There is certainly an abundance of advocates for renewable energy; Wind, Solar, and Nuclear, which I support as an important part of the power supply portfolio. At the same time we have a shortage of advocates for two of the most abundant resources here in the United States; Natural Gas and Coal. Many express concerns about the environmental impact of coal and rightfully so, however it is still a significant domestic resource. On the other hand natural gas coupled with existing low emissions technologies produce affordable reliable power with low levels of pollutants.
The discovery of the shale gas changed the strategic landscape for the power industry. However it does not appear power companies are taking this new reality along with other structural changes in the industry to develop new short term strategies to stimulate revenues from existing capacities powered by natural gas. Neither does it appear that companies are developing long term strategies to emerge as leaders for the future. And if you ask why, companies will give a wide range of reasons, some may be regulatory, some environmental, and other may have to do with the market fundamentals.
Utilities and independent power producers appear to be taking the risk free option by just holding the status quo waiting for a leader to emerge and follow suit. With environmental regulations driving up to 95 GW of coal power plants in the next 20 years coupled with large supplies of shale gas present an investment opportunity in improving efficiency of existing natural gas powered plants and developing new clean and more efficient plants for the future. With limitations of wind, solar, and nuclear energy in the near future, most of this capacity will have to be replaced with natural gas power plants. Yet we see very little movement to capitalize on these realities.
What we are also lacking are the necessary investments in more efficient gas turbine technologies and more advanced combustion technologies for both Natural gas and coal. These two components will significantly contribute to improving energy efficiency and reducing harmful emissions from coal and virtually eliminating emissions from natural gas fueled power plants; such promising technologies do exist today.
So how is your organization maximizing today's results and preparing to lead in the future? Are you just waiting for a leader to emerge to follow suit? Or are you taking active steps to create an environment of innovation and generating executable and sustainable strategies for the future? How are you building your forward competitive advantage and differentiation? Have you revisited you strategy in the past year? Two? Or even in the past three years? And have and examined its effectiveness for the next boom given the structural changes in the industry?
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Excellent article, Mr. Mutasem. Concise (less than 500 words), straight to the point, and posing leading questions that do deserve answers. I have more questions that also beg answers. With your kind permission, a sampling follows.
Are qualified engineers participating in decision loops at every hierarchical level? Is the feedback we get absolutely reliable, i.e. complete and truthful? Where has our ability to dream gone to? How do we select our “best and brightest”? Are our accomplishments recognized by those who count? Do we really understand at what point concepts become facts? Do we all have a thorough working knowledge of mathematics and how to apply this knowledge? Do we fully accept that a negative answer is just as valid as a positive one?
The foregoing are based on experiences. If a novel concept is reduced to practicality, proven by demonstration, mathematically confirmed, and has passed the required tests to prove financial and commercial viability, then surely it should move towards full-scale demonstration. But no, there it is, languishing in limbo. Why?
Alan E. Belcher.
Len Gould 12.15.11
Have you spent as much actually meeting EPA emissions regulations as you have trying to buy (sorry, "lobby" LOL) politicians?
Malcolm Rawlingson 12.15.11
In Ontario over the last few years there has been a Government driven push to eliminate coal as a source of electrical generation. The arguments for this are both environmental and economic. Ontario has no coal deposits of its own therefore all of the coal burned must be shipped to the power plants from the USA or from Western Canada. Secondly reducing sulphur and nitrous oxide emissions from these plants requires expensive retrofits of scrubbers and other technologies. Other emissions from burning such large quantities of coal are mercury and arsenic and other issues such as city smog influenced this decision I am sure. Estimates of premature deaths from burning coal vary but some studies put it as high as 1000 per year which, if that is to be believed has a large health care cost associated with it.
So Ontario is phasing out coal and will not be constructing any new coal plants. However it is interesting to note that a large part of the replacement capacity installed is natural gas fired - mostly highly efficient combined cycle plants such as the ones at Halton Hills and the Hearn site in the Toronto docklands. Some windmills have been installed. The bulk of the power comes from nuclear plants which do and will for the foreseeable future - be the backbone of the grid.
I can see that with many old coal plants in the US reaching the end of their useful lives plus the requirement for cleaner alternatives will drive most utilities to natural gas and to the life extension of existing nuclear plants. The coal industry is not concerned particularly since it can export all the coal it can dig out of the ground to China and India.
It is in fact what most utilities are doing and with the prospect of a glut of US supplied natural gas this is almost certainly the way things will unfold. Now how long that glut will last and what effect that will have on gas prices remains to be seen.
Much of the gas is being produced as a by product of drilling for the higher value petroleum liquids contained in shale deposits. That is the case in the Bakken field. My industry insiders tell me that if drilling were being done for natural gas alone the investment will not repay itself at current natural gas prices. That will eventually cause gas prices to rise and therefore the cost of gas fired generation to rise. As a counter to that possibility large LNG terminals are being constructed to export US natural gas. Of course that means you can also import it and since there are many countries with abundant supplies of natural gas who would be only too pleased to export it to the North American gas grid then in my humble opinion gas prices are going to be low for a long long time.
So - an excellent article. I suspect the future will be in high efficiency combined cycle gas plants coupled with base load nuclear and hydroelectricity where available with a bit of wind and solar thrown in to keep the renewables camp happy.
It is like walking a political tightrope.
Ferdinand E. Banks 12.16.11
Yes, the article is OK. I'm going to give a short course on energy economics in Spain next month, and Malcolm's remark about drilling for gas without gaining access to liquids with be part of my song and dance.
What is not OK however is the expression GAME CHANGER. I heard this the first time in in a low-level - waste of time - seminar in Stockholm, and I also saw the expression in an article in the NY Times or Wall Street Journal by Amy Jaffee. Thatt was enough to tell me that the great world of academic economics probably had it wrong again.
Of course, there is another factor here. When I took my first degree in Chicago I applied for graduate school at the University of Chicago, Fortunately, luckily, they did not even bother to reply, however a few years ago I communicated with a young gentleman there, and he assured me that a gas OPEC was very unlikely. I interpret his reply as meaning that a gas OPEC is certain, although I have not thought about the details yet. Maybe I will for my course in Spain.
Alan Belcher 12.16.11
“Have you spent as much actually meeting EPA emissions regulations as you have trying to buy politicians?”
You were right the first time around so I have taken the liberty of removing the “(sorry, “lobby” LOL)” from your post. I believe that “buying” is the most appropriate term here. My answer is “Yes” for the emissions side and a definite “No” for the purchase of politicians, or their political favors.
The foregoing might well point to one of the many stumbling blocks we have run into. However, I feel that there is a deeper and more pervasive factor at play here, namely the lack of reliable feedback. Reading between the lines, I think the article’s author is also basing his concerns on this same point.
All too often I have quoted references that later proved to be flawed in some way. In a few cases I have become acquainted with the authors of such material and I am more than satisfied that what was passed on was done so in good faith and without any intention of causing harm. I can only conclude from these experiences that their sources of information were also flawed.
How far back could this go? Anyone’s guess. Is the well-water tainted? The engineers and scientists, and the journalists, lawmakers, and pundits have all been “drinking” from this same well. Indeed, this could be a serious situation that we must all address without delay, in one way or another.
Alan E. Belcher
Michael Keller 12.16.11
I am not so sure that the statement "Yet we see very little movement to capitalize on these realities" is entirely accurate.
A review of Gas Turbine World shows that very efficient combined-cycle and simple-cycle power plants continue to be installed in the US and at a pretty good pace. The machine's reasonable build cost, very low emissions and relatively fast construction durations mean the facilities can be deployed as dictated by optimized financial drivers. In other words, they can be built as driven by need versus the extremely long bureaucratic time lags associated with coal and nuclear plants.
Kerry Sloan 12.20.11
Does anyone have a clue why the power market strugles to get $35 per megawatt hour?
bill payne 12.20.11
EPA rules have been alleged to be part of an Obama administration ploy to advance solar and wind generation of electricity for business reasons.
A survey conducted by The Associated Press (AP), based on interviews with 55 power plant operators and on the U.S. Environmental Protection Agency’s (EPA’s) prediction of power plant retirements, estimates that more than 32 mostly coal-fired power plants in a dozen states will be need to be shut down and an additional 36 might have to close because of new federal emissions control regulations.
A most interesting observation Fred - about a new natural gas cartel forming. I guess we will call it OGEC - Organisation of Gas Exporting Countries. The advent of large scale LNG facilities in many countires including the USA make possible the shipment of LNG in the very same way that oil is shipped. That means to me as a non-economist that the price of LNG and therefore natural gas will become traded as a world commodity just like oil. In many applications gas is a direct replacement for oil and for automobiles engines will run just fine on it.
In North America until very recently gas was in short supply but that whole situation has changed. Now whether the Bakken, Marcellus, Three Forks and other shale gas fields live up to their promise is another matter. I suspect they will at least for the next few years. That holds out the possibility that the USA will become a major exporter of LNG. Russia also has major natural gas fields and may be very interested in the OGEC cartel to fix gas prices by regulating supply just as OPEC has done since the 70's. With the discovery of large shale gas fields under Poland Russia could lose control of the gas supply monopoly it has on Eurpoe and may be looking for a better way to control gas prices. OGEC would fit the bill even if they have to get in bed with the US.
Now wouldn't that make an interesting membership. Russia, USA and Algeria?
bill payne 12.20.11
"But the gas may not be as easy and cheap to extract from shale formations deep underground as the companies are saying, according to hundreds of industry e-mails and internal documents and an analysis of data from thousands of wells. ..." appeared in a New York Times Sunday front page article by Ian Urbina.
Kerry, Of course. All the immense efforts of Governments to have us stop using electricity results in a decrease in demand for the product. The price goes down when you have more supply than demand. That is what we have. Add to that the fact that many large consumers of electricity now make their products overseas. Closed factories do not use electricity.
So not at all difficult to understand why it is hard to sell at $35/MW.hr It is the obvious and only possible end result of electricity conservation.
The next result will be utilities going out of business and power plant closures. That will decrease supply of course.
Malcolm Rawlingson 12.20.11
I absolutely agree with you. Earlier I had mentioned that natural gas is only being produced because it is a by product of the extraction of natural gas liquids which command much higher prices and are the feedstock for Pharmaceutical and plastics industries. They are not drilling just for the gas because there is no money in that at the moment. World wide gas prices need to be much higher that at present to make gas only shale drilling worth it. Most of the new wells being drilled are in those formations that have natural gas liquids associated with them or in some cases shale oil. That is one of the reasons that the Keystone Pipeline is important as it links the shale oil fields of the Bakken under North Dakota to refining capacity in Texas. It is not just about moving Canadian oil sands oil to the US.
The assumption that many make is that these shales are the same. They are not and like any business drillers will look for the best profit for their investment and that is not drilling for pure natural gas. Those wells will be drilled when the prices of natural gas are much higher than now.
bill payne 12.20.11
“Money is pouring in” from investors even though shale gas is “inherently unprofitable,” an analyst from PNC Wealth Management, an investment company, wrote to a contractor in a February e-mail. “Reminds you of dot-coms.”
“The word in the world of independents is that the shale plays are just giant Ponzi schemes and the economics just do not work,” an analyst from IHS Drilling Data, an energy research company, wrote in an e-mail on Aug. 28, 2009.
There is one major difference between natural gas and other energy mediums.
Natural gas is methane, CH4. Methane is both a fossil fuel(natural gas) and a biofeul(biomethane). Exactly the same stuff......CH4. Fossil methane and biomethane can be mixed together in any proportion---or used stand alone in any application with no loss of performance in any application.
Biomethane can be produced low tech, easily, cheaply, and sustainably from any type of biomass at all, including sewage and landfills.
Shipping a product all over the world that is easily producible from sewage and any other sort of organic waste material at all does not make very much sense. Especially when it is exactly the same stuff as would be shipped.
Kerry Sloan 12.21.11
Your response is pretty obvious, but misses the point. At $35 per MWH, most utuilities can't even cover their production costs. How can they, or why are they continuing to sell power at or below their production costs? That is the point of the question. The laws of supply and demand aren't nearly as black and white when it comes to electricity and protected distribution territories for electric utilities. Yes, there is currently a surplus of power generation, but based on the forthcoming EPA rules that will shutter dozens of coal plants and take thousands of megawatts offline, why are these power generators not trying to recover some of the costs to meet the new EPA rules now? Seems to me, if they wait until the last minute, we are all going to see some huge rate increases basically all at once.
Murray Duffin 12.21.11
The real question Sam should be asking is "have you quantified the outlook for shale gas?" IN the higjly developed fields the high yielding sweet spots are less than 30% of the prospective area, so we can be sure that the economically recoverable gas is much less than the numbers that have been floated by producers raising money. Also the mature free flowing fields are near exhaustion, and when they go into decline, shale gas will not be brought on stream fast enough to offset the entire decline. As has been noted above, without liquids, none of the fields would be developed at todays NG prices. Considering all, shale gas is nioce to have, but is not much of a game changer. It shopuld be a gane maintainer for a couple of decades.
Jerry Watson 12.21.11
I was an energy trader for five years last trading in 2003 so it has been a while. This said $35/MWH dollars is profitable. Combined Cycles can easily do 7000 heat rates. Doing the math with $3 gas give a $21 fuel cost and $14 spark spread. A $14 spread is adequate to cover the cost of O&M and ownership of a combined cycle plant.
It is not quite this simple construction costs are sunk costs so with three dollar gas and $7 O&M it appears that any price over $28 would allow some recover on the investment. In the case of a Nuclear unit its lifetime cost of generation is likely over a $100/MWH however almost all that cost is sunk cost with fuel only a few dollars. Using $7 (just a wag) as its fuel cost anything over that level is recovering some of the capital invested. But it is more complex than that for the Nukes the technology and regulatory framework is not suited to cycling. Once construction is complete a fueled unit will likely run flat out 24x7 without regard to price which can crush off peak prices in areas with significant nuclear generation. Wind mills are similar they generate when the wind blows with little regard for price unless like several ISO the generator will be charged to generate when it is not needed and is over the scheduled quantity and can profit more by shutting down than generating which typically a off peak only event.
Anyway Coal, Combined Cycle natural gas, Wind, Nuclear all have a positive cash flow at $35 in a weak economy with excess capacity one should expect low prices. Currently with Natural Gas being on the margin and $14 spark spread is more than adequate to keep them running.
Jerry Watson 12.21.11
The short article really doesn’t have any new news and isn’t perfectly accurate. Shale gas is not a recent discovery. Even the new parts horizontal drilling, fracking, and extraction have several years of history. During the 2008 gas price spikes it was somehow missed that masses of new gas reserves were coming into service and that literally thousands of miles of piping were being completed to bring the new reserves into the system. Drilling rig count was high in 2008 but has since dropped way off to just over 800. What I found remarkable in 2008 was in the face of the new reserves, technology, and pipelines that somehow a price spike occurred that fueled a near panic and a round of ill advised hedging with partakers securing historic highs for their efforts. I wonder if the price run up was a market event or show of market power by the well informed who knew that in a few weeks the growing oversupply would be impossible to hide and make such events very difficult to orchestrate.
Ironically, I doubt anyone is hedging gas right now since it just makes too much since, the economy is weak, gas is plentiful, storage is at record highs, and the 12 month strip is less than $3.50/mmbtu. This is a fuel cost under 2.5 cent /kw in a combined cycle plant. I always wonder if users think the gas price will go to zero. It is near its logical bottom at now. At $2/mmbtu Nat Gas can be burned in traditional steam boilers with 10,000 heat rates and have a 2 cent/kw fuel cost that would make coal burning impractical. Long Term cheap Nat Gas should make fuel switching attractive on existing plants. The 3000 heat rate advantage of Combined cycle is less than a 1 cent/kw fuel cost difference with $3 gas. Even with Current Nat Gas prices fuel switching from coal to gas would make more sense than building new efficient plants.
If gas stays cheap so will electrical power. Simple cycle CT’s with 11000 heat rates have a 3.3 cent/KWH fuel cost. all one is looking at 4.5cent/KWH generation for this generation. To differ with author cheap gas takes away the incentive to invest in new technologies. It looks like preserving capital and fuel switching would make more since.
Thomas Casten 12.21.11
Len: Game changer or Enron redux? Various thoughtful studies show a $6 to $8 per MCF cost of shale gas. The claimed 100 year reserves ignore the very steep decline rate from fields that are fracked and assume gas demand stays at 2010 levels, Reality might be ten years reserves.
I caution all decision makers to look at the cash flows of the Chesapeaks and others who continue to hype the shale gas future and raise equity, but are burning cash. If the financial community had insisted on looking at Enron EBITDA, we would not have bid them up to $50 billion, only to lose it all.
Fracking is a nice technological advance, able to produce Btus of fuel at well below the cost of petroleum, but apparently not at the current price of gas. We should not be mislead to drop focus on extracing more useful energy from every Btu of fossil fuel. We should avoid making 35 year investments in any gas burning technology that does not use the energy twice -- that combines production of heat and power with a net electricity heat rate of under 5,000 Btu per kWh.
During the Enron bubble, Dynergy stopped building combined cycle and focused on peakers, most of which barely operate. Don't bet against efficiency again.
Tom Casten, Chair Recycled Energy Development
Keith Moore 12.21.11
Merry Christmas Mr. Mutasem:
I enjoyed your article and agree with you that there are advanced combustion technologies to improve energy efficiency and reduce harmful emissions from coal.
I refer to the field demonstrated CLEAN COMBUSTION SYSTEM (CCS), a hybrid of coal-gasification/combustion for SO2 and NOx emissions control with improved efficiency. See www.phenix-limited.com .
The CCS provides plant owners an opportunity to Re-Engineer the older, smaller (<300MW) coal-fired units with a low-cost solution to meet the stringent new EPA regulations. Additional coal process steps also address the new EPA mercury emission limits.
Installation of SO2 and NOx emissions control technologies provide the older coal-fired power plants with permit waivers of NSPS, PSD (and no NSR), also allowing many other plant improvements that will provide a competitive dispatch and an extended operating life. The challenge is "how best" to get the CCS (or any other advanced) technology accepted/applied in the typical take-no-risk “regulated” Utility. We observe the only options being considered today for the older, smaller plants are To Shut Down and Abandon the asset. Clearly, one option is to acquire these abandoned assets, and with a rather modest investment in new technology and development work, re-engineering the power plant for a very-large and long-term ROI to the investors.
Keith Moore CastleLight Energy Corp firstname.lastname@example.org
Don Hirschberg 12.22.11
As a serious loser stemming from Dynegy’s take-over of Illinois Power (in which I had invested) and the ensuing debacle with Enron I am a bit leery of being instructed by Dynegy - even today.
bill payne 12.22.11
Thursday December 22, 2011 17:06
Wind and large-scale generation of electricity business ploy? -------------------------------------------------------------------------------- PRC TO PNM: TRY AGAIN — The Public Regulation Commissioner rejected PNM’s retooled renewable energy procurement plan on Thursday and told the state’s largest utility to go back to the drawing board, try harder to meet state goals, and come back in two months.
From: "ABQjournal Business Insider" email@example.com To: firstname.lastname@example.org Sent: Thursday, December 22, 2011 4:00:33 PM Subject: ABQJournal Business Insider
Ferdinand E. Banks 12.23.11
We've got a couple of very interesting observations above. The one by Murray Duffin of course, and the one by Thomas Casten about making 35 year investments. I've heard some praise for shale gas that definitely had the wrong kind of smell about it, and a few things that don't make any sense at all.
bill payne 12.23.11
Texas wind turbine generation of electricity problems?
Transmission towers south of Sweetwater, TX wind turbines.
-------------------------------------------------------------------------------- From: "John Sobolewski" To: email@example.com Sent: Friday, December 23, 2011 5:48:24 PM Subject: RE: Much of altenergy may be a scam?
Alternative energy is not economical today and can only survive with massive government subsidies.
So I would not call it a scam but a government ripoff of taxpayers. Obama's buddy and big timeelection contributor Imelt, CEO of General Electric, is laughing all the way to the bank selling windturbines that Obama subsidizes in return for Imelt's contributions for Obama's reelection. Who says Obama is for the middle class? He gets millions of contributions from Hollywood and Wall Street fat cat millionaires and screws the middle class by rewarding them with OUR tax money.
Where is the media reporting this? Nowhere because they are all part of Obama's fat cat fratrenity. Most Americans are too dumb to figure this out. I have to say this about Obama - with his media buddies he has a better propaganda machine than Hitler or Stalin ever had.
Bill: Are you proposing that Gingrich would bet better? LOL.
Alan Belcher 12.25.11
Response to Sam Mutasem’s Questions
Finally, a stake in the ground! EPA’s Final Rule governing mercury emissions at power plants states the release of mercury shall not exceed 1.2 lbs/TBtu applicable to “Existing – Unit not low-rank virgin coal”. Plants firing lignite are reportedly allowed a slight increase in mercury emissions (1.4 lbs/TBtu) but I could find no reference in EPA’s .pdf file. For the uninitiated TBtu represents 1 Trillion Btu, or 1,000,000,000,000 British Thermal Units.
The following worked examples are based on EPA figures and shows how my company’s contribution could help facility owners meet these targets for a lower investment cost and greatly reduced operating costs. Minor discrepancies are the result of rounding.
The new EPA Rule target for mercury emissions is: 1.20 lbs/TBtu
Case 1 – “Do Nothing” Scenario
EPA’s 2010 Baseline for mercury emissions is 29 tons/year which translates to 6.62 pounds per hour per TBtu: 6.62 lbs/TBtu
The plant would have to remove a little less than 82% of the Hg baseline to achieve compliance: 5.42 lbs/TBtu
Case 2 – Plant Efficiency Raised by Heat Recovery
Application of our heat recovery technology is estimated to lower the baseline emissions by 33% of the baseline: 4.37 lbs/TBtu
Now the plant would have to remove only 52% of the original Hg baseline to achieve compliance: 3.18 lbs/TBtu
The mercury emissions to be removed in Case 2 are approximately 41% of what would have had to be removed in Case 1, or a gain of some 2.26 lbs/TBtu. A reduced emissions stream allows for a corresponding reduction in capital investment for emissions control equipment plus a reduction in the disposal costs for the effluent stream.
However, such benefits would be easily surpassed by the fact that, along with other waste heat recovery or recycled energy systems, our system produces significant levels of dispatchable electric power. Depending on various site and market factors, the bonus power could be used in its entirety to offset the overheads of operating conventional emissions control equipment, or any surplus might be dispatched profitably.
Privately I share the opinion expressed by many in the power industry that EPA’s specified time-frame of 3 years is far too short. In closing I should remind readers of one of my previously posted questions concerning accuracy of what is published by the media and others in general. True to form, while researching the Internet I came across the statement that the new limit for mercury was to be 1.2 lbs/million Btu, instead of the correct TeraBtu. Well, give or take a little, what’s a million among friends?
Wishing everyone the Season’s Greetings!
Alan E. Belcher.
Don Hirschberg 12.26.11
Alan, I’ll admit to a slight smirk when the metrically correct force what I have always simply called engineering units, such as BTUs, into pseudo metric units by applying power of ten prefix words. I don’t know why we can’t use x 10^12 and not screw with the words. In the same discussion we see people using 1.2 gigs while another says 1200 Megs, another, 1.200 kilo-mega kilowatts? -the possible permutations are many. We are victims of a system with tiny quantities, ergs, dynes, grams, calories, watts. (The food people ignore the system and call their calorie a calorie even though it is a kilocalorie.) What the regulation is talking about is the tenth part of a therm.
I remember being asked one time, “How many galaxies are in an average cubic mega parsec?” If memory serves it was a number about three or four.
Len Gould 12.26.11
At some near future, you guys are all going to have to join the real world as far as units of measure go, and with China graduating 25 engineers for every one in the US, I'd estiamte that time is "very soon".
Alan Belcher 12.27.11
Messrs Don Hirschberg and Len Gould.
My objective here was to communicate some facts germane to the theme of the original article. Rather than digress into a discussion of the merits of the many number systems at our disposal. I followed the exact representation as published by EPA. Any future changes or departures from what has been stated would then become more obvious to us all.
Alan E. Belcher
Don Hirschberg 12.27.11
Alan, I'm on your side. Particularily your comments about the media - being off by a factor of a million and they will never know it. I intended to be jolly , not offensive.
Alan Belcher 12.28.11
I had no intention of putting you down, nor Len for that matter. If I came over as being a little brusque, then please accept my apologies, but it is the urgency of the matter that spurs me on; time is not on our side. The technology we are offering will not bring a coal-fired plant into compliance, but it will bring compliance closer to being fulfilled.
Perfectly viable coal-fired plants are currently being slated for demolition. We would really like to exchange views with the decision makers involved to identify strategies for moving forwards in a productive manner.
Alan E. Belcher
Malcolm Rawlingson 12.30.11
Regarding units of measurement - does not matter much to me. I was trained at the time both SI and British systems were in use so they are fully interchangeable in my world. As far as the public and the media are concerned most people don't even grasp the difference between a milliwatt and a megawatt so what units you use doesn't matter when you are dealing with a largely technically illiterate public. When I hear the media and even many people who should know better use the phrases like "produces enough electricity to power 1000 homes" I realise there is no hope. In Ontario we are indeed shutting down perfectly viable coal burning power plants that have years of life left in them. The reasons why are outlined in my post above. The Province is moving to cleaner fuels and while I question the costs associated with this effort it will result in a much cleaner generation mix. A major plank in that effort is nuclear power and two refurbished plants will be coming on line in 2012. While it may not be obvious to many the US is steadily increasing its nuclear power capability. The Tennessee Valley Authority is completing the construction of Bellefonte Unit 1 which was never completed after Three Mile Island. It has already completed all three units at Browns Ferry which are now operating as well as the two plants at Watts Bar. A second plant at Bellefonte may also be completed pending the successful completion of Unit 1. Life extensions of existing plants are also proceeding and the USNRC has recently approved the Westinghouse APR 1000 for construction in the USA. Several sites in the USA are slated for development using this reactor type. So although natural gas plants are easy to build the cost of power from them will always be subject to the variability of natural gas prices. If you are prepard to gamble that gas prices will always be this low for the life of the plant then then these types of plants offer some advantages. With a nuclear plant once built the running costs are very predictable and generally lower than natural gas plants. Nuclear plants also benefit from low capital borowing costs so the amortized cost over 40 or 50 years is the lowest it has been in many years. So I think that the coal plants will be replaced by a combination of nuclear and natural gas which is a very attractive combination and is working very well in Ontario. Nuclear provides the baseload backbone of the grid while natural gas combined cycle plants provide power peaking and some base load when baseload exceeds nuclear and hydroelectric capacity. Of course this set up could get very expensive to operate if natural gas prices increase so there is a bit of a gamble here. Malcolm
Malcolm Rawlingson 12.30.11
Kerry. I do agree with you that it is pretty obvious but am always surprised at how poor our understanding of the obvious is. Basic economics dictates that the more units of something you produce the lower is the cost per unit. If you embark on a campaign of forced consumption reduction you produce less with the same capital investment so without market intervention by Governments the price per unit must increase.
Apparently this concept is lost on most politicians. The electricity market is so distorted by Government intervention that I do not see a time when demand and supply dictate the price as they should in a free market.
So agree that this is obvious but as they say there are none so blind as those that will not see.
Ferdinand E. Banks 12.31.11
In regard to Len's remark, maybe it'is time to be brusque. I almost always agree with Malcolm. but the problems of the the electricity market in many countries are not due to government intervention, but government inaction. As the governor or Washington (State) once remarked, the government stood by and let Enron and similar organizations and stupid academics and self-appointed experts that I do not feel like nameing today impose a crazy deregulation agenda on us. Here in Sweden when deregulation came in, the largest Swedish utility began to concentrate on Germany, where they announced plans for greening their operations that made no economic or scientific sense whatsoever.
Malcolm Rawlingson 1.1.12
Happy New Year to All. Yes on reading my post here I think I was a bit off the mark Fred. I agree with you that deregulation does not appear to have worked to the benefit of customers (as it was proposed). It was sold on the basis of reducing electricity costs and efficiency. It appears to have produced neither. Malcolm
Len Gould 1.1.12
In a long run, genuine deregulation and a genuinely competitive market will produce benefits for all customers served by a given market as compared to full regulation. Fred's complaint is that as part of deregulation, Sweden's market was extended to include Germany, which, though problematic for Fred as a Swede, should have genuinely benefited the sum of customers across both Sweden and Germany IF the market system chosen had included ALL customers and not been restricted to only a very few retailers who add no value to the system, only costs.