Stallard — From Centralized to Dynamic Distribution Systems

This lesson was perhaps the most interesting one in the entire course to me because of the topic — how to transition a century-old centralized or central station electric system to one of local generation or decentralization. The Wisconsin Energy Institute’s paper “Transforming the Grid from the Distribution System Out” offers clear ideas on how to transition to a dynamic distribution system and new energy marketplace while ensuring profitability for the traditional electric utility and reliable and affordable retail electricity rates for consumers — all through a new, dynamic use of the distribution system. This idea bridges the gap between developing renewable energy resources for environmental and economic reasons without regard for supply and demand requirements to a system that investigates the market and sites generation according to load requirements, availability of supply or resources, storage and available base load generation to supplement and stabilize demand. The dynamic distribution system and marketplace discussed in the article seemed to me to be the design that provided the best promise of transition. It integrates the best of central utilities and the best of distributed energy resources without creating a system of winners and losers. (Wisconsin, Page 4) The effects of greater decentralization of power generation, if done correctly, are effective integration of renewable energy resources, local reliability with a degree of independence, local control over resources and ultimately price, jobs and a boost to the local economy.

Many new businesses will have to evolve in this transition. The battery storage technology will have to be perfected to improve reliability. Small and large energy consumers will have to be educated and encouraged to participate in micro-grid or dynamic distribution systems. Residential energy consumers will also have to understand the new electricity distribution model. Engineers specializing in load controls, heat recovery, energy storage and carbon minimization technology will have to be involved. Flexible utility business models will have to be developed and promoted. Educational opportunities will exist with regulators and legislators as incentives, laws and regulations will have to be changed. Finally, the transition will require the talent of many people and firms who have the vision and knowledge to recreate the central distribution system of today to a more sustainable electric system of tomorrow.

I would absolutely love to be the person who could figure out how to recreate the electric cooperative we have today to a new cooperative that embraces a dynamic distribution system and new energy marketplace of tomorrow. I have been interested in this for quite some time and the Wisconsin Energy Institute paper advanced my thinking on the topic quite a bit. I am not an inventor or engineer, but I think I could create a business that would advance the concept of transforming our existing system to the dynamic distribution system described in the paper. I think demonstration projects are very important in the transition. Often times, people need to be able to learn from an example; and that’s what demonstration projects offer. I think I could start with our local community college, promote the development of a micro-grid that integrates with the existing electric cooperative distribution system and results in a reliable, affordable and sustainable model for others to use in the future. The business would have to either employ electrical engineers, financial experts (to secure funding) and construction workers or would have to be able to partner and collaborate with the local utility and engage the local community to be successful. I prefer the latter, in which I would be a consultant, as it is a way to start out slow, with little capital investment and grow as conditions permit. Once the demonstration project was completed, the business could use the same concept in developing micro-grids at wastewater treatment plants, hospitals and other major industries. Other business opportunities include community project coordinator, project proposal developer and educator (either through developing school curriculum to teach the new concepts, training the new skills existing linemen and utility workers will need or marketing the concepts to potential project owners).

Beihoff, Bruce, Jahns, Tom, Lasseter, Robert and Radloff, Gary. Wisconsin Energy Institute, University of Wisconsin-Madison, July 2014, “Transforming the Grid from the Distribution System Out,” https://energy.wisc.edu/sites/default/files/Transforming-the-Grid-from-the-Distribution-System-Out.pdf.

Stallard — The Cost of Capital; Not Just Money

I approached this assignment as if I were submitting a proposal to my board of directors for a project that would be funded by the member/owners of my electric cooperative — funding that is in part debt, retail electricity rates and member equity. The key concepts are the same for any proposal that involves a financial investment — to present the financial facts along with an industry and political forecast and perspective that will demonstrate the project is viable from the beginning and profitable in the end. The project needs to make sense for the people who will be funding it. In the case of a renewable energy project, I would need to be able to explain the short-term and long-term need for the power output of the project; the capital outlay or investment; what incentives, grant money or funding is available; any political, regulatory or market-based disruptions and support or opposition for the project.

With regard to the financial justification, several processes are involved. First, I would need to demonstrate the return on investment which in its very simplest terms is the ratio between the gain from investment and the cost of that investment. This represents the benefit the investors — in this case, the paying membership — gain from the utility doing the project. Second, I would calculate the return on equity, which is the net income after tax divided by shareholder equity. This is a little more complex for an electric cooperative, but given that business model, it would be the net income (income after expenses) compared to member equity and would represent the membership’s investment in the effort. The weighted average cost of capital (WACC) is the rate that a company is expected to pay on average to all its security holders to finance its assets. While it might mean the minimum the company must make to satisfy its creditors or investors, in the case of an electric cooperative, it would mean that the cooperative has money or member equity left over after all expenses are paid. Most cooperatives have an established equity level that must be maintained to satisfy internal controls and financial institution requirements. I would also need to calculate and communicate the net present value, which explains the potential for the success of the project. The NPV projects the change in the project’s value from the time the investment is made for a period of years. A positive NPV means the project is viable in the long-term.

Overall, the financial calculations need to be presented as the payback on investment, given the individual circumstances and geographical differences. Information and data used in the analysis needs to represent the true, most up-to-date cost of a project as those costs are constantly evolving with technological advances. Ultimately, it goes beyond just cost to considerations that include projections with regard to government incentives as well as legislative and regulatory initiatives. All ultimately affect cost.

Renewable Power Generation Costs in 2012. International Renewable Energy Agency. 2013. Retrieved from http://www.irena.org/DocumentDownloads/Publications/

Lesson 3 – Energy Efficiency Model based on PNW

One way the government could promote energy efficiency would be to establish broad policy initiatives that recognize energy efficiency as an energy resource. A model for this exists in the Pacific Northwest. In December 1980, Congress authorized the Pacific Northwest Electric Power Planning and Conservation Act, Public Law 96-501, which established the Pacific Northwest Electric Power and Conservation Planning Council, more commonly known as the Northwest Power and Conservation Council or the Council. (Ossmann, 2013) The following year, four states — Idaho, Montana, Oregon and Washington — agreed to make the Council an interstate agency for planning purposes and to provide policy leadership on energy and fish and wildlife issues. The Council develops plans in partnership with the states and general public which, when implemented, assure sustainability defined as including a safe, reliable and economical power supply with “due regard for the environment.” (Ossmann, 2013) The Council, through its regional planning process, often called the “regional dialog,” solicits broad public input and then works to develop a long-range plan that meets the region’s energy and environmental needs while balancing competing interests. In the planning process, energy efficiency has long been considered the least-cost energy resource and a more sustainable way to address increased need for generation brought on by a growing population and economy. In the 34 years since the Act was established, the region has saved more than 5,300 average megawatts, which would be the electricity needed to power five cities the size of Seattle. (Council, 2014) The federal government has also recognized the value of energy efficiency in the Environmental Protection Agency’s proposed rule to reduce carbon emissions from power plants by 30 percent from 2005 levels by 2030. (EPA, 2014) The proposed rule sets emissions standards at the state level, encourages collaboration among states and recognizes the value in zero-emissions actions like energy efficiency and renewable energy in meeting those reduction standards. Clearly, the government is capable of establishing policy and then stepping aside to let regions, states or communities go to work on local solutions.

The Pacific Northwest has an effective planning process in place that helps guide energy and natural resource policies and practices. Energy efficiency is an integral part of that plan. For decades, utilities in the region have developed, implemented and promoted energy efficiency programs to help the region meet its sustainability goals. I think that model could be used to assist other regions in meeting the emissions reduction standards in the proposed rule. To move this idea forward, I would propose a business with the expertise available to establish regional versions of the Council. The entity would have representatives from each state and would be tasked with developing a regional plan for not only meeting the emissions standards from power plants, but to also give due consideration to the environment. Energy efficiency would be recognized as key in not only meeting the standards but in creating a more sustainable environment for the future.

Environmental Protection Agency. “Clean Power Plan Proposed Rule.” Retrieved 9/12/14 from http://www2.epa.gov/carbon-pollution-standards/clean-power-plan-proposed-rule

Northwest Power & Conservation Council. August 7, 2014. “Energy Efficiency Will Help Meet EPA’s Carbon Rules.” Retrieved 9/12/14 from https://www.nwcouncil.org/news/blog/energy-efficiency-will-help-meet-epa-carbon-rules/

Ossman, Sharon. January 16, 2013. Northwest Power & Conservation Council Bylaws. Retrieved 9/12/14 from https://www.nwcouncil.org/about/policies/bylaws/

Stallard-Searching for the Niche

The Energy Information Administration forecasts a 28 percent increase in our nation’s power demand through 2040 (Perry, 2014). The Obama Administration’s goal is to generate 80 percent of our nation’s energy needs through clean energy sources by 2035. Nuclear energy, natural gas, wind, solar and clean coal are part of the Administration’s plan to move our country to a cleaner energy future. I’ll admit, I spent a lot of time on this assignment (way more than the 10 hour allotment for the week) because I know very little about energy subsidies and I have a curiosity that is hard to manage at times. I was questioning whether or not it was true that greater attention and support from investors and the government was being paid to nuclear than renewable energy production. Then I ran across an article that referenced a comprehensive study from the venture capital firm DBL Investors that found that the “federal commitment to [oil and gas] was five times greater than the federal commitment to renewables during the first 15 years of each subsidy’s life, and it was more than 10 times greater for nuclear.”(ACORE, 2014) Even though that was in the past, I think there are valid reasons for why that was — and perhaps still should be — the case. First, our nation’s system for delivering electricity to the end user is, for the most part, reliant on central-station generation concept, which combines constant or base load generation with generation designed for periods of high consumer demand. Both are critical in maintaining a safe, reliable electric system that meets the demand electric consumers place on it every hour of every day. Once developed, base load resources such as coal, natural gas, hydroelectric and nuclear are generally the most economical plants to operate. They have very little variability in output, unlike other renewable energy generation that is dependent on the wind or sun. Currently, nuclear represents 12 percent of the country’s generating capacity and operates at around 90 percent capacity. In comparison, wind generation represents 4 percent of the country’s generating capacity and the capacity value — how much of the wind plant’s capacity can be counted on for meeting electric demand — is only 15 to 20 percent of the nameplate rating (AWEA, 2013). Second, nuclear plants have higher fixed costs and require more lead time for development, so the amount of investment from private industry or the government is higher than what is required for renewable projects. For example, the only nuclear project currently under development is a $14 billion project of which $8 billion has been funded by the federal government through loan guarantees. Finally, many of our nation’s nuclear facilities are located near major urban areas, so it seems reasonable that our government support projects designed to upgrade these older facilities to allow them to continue to provide a reliable supply of energy for the future. Nuclear currently supplies 20 percent of the energy in the United States and 64 percent of all zero-carbon emissions sources (Perry, 2014), making it already an important part of the base load and clean energy resource mix. Given nuclear energy’s current role in our nation’s energy mix, the demonstrated efficiency and reliability factors of the resource and the goals of the Obama Administration, it seems government and investors should lend more support to nuclear in the future.

With regard to niche opportunities, I believe if society truly has a desire to transition from the traditional central-station concept to more distributed generation, we need to develop large-scale battery storage systems that can effectively manage the intermittent nature of renewable energy generation that relies on weather, wind or sun. Because I work for an electric utility, I think there are also niche opportunities for entrepreneurs who can figure out how to transition our traditional integrated utility structure that was designed around the central-station concept into one that embraces more distributed generation without placing a huge financial burden on electric consumers who foot the bill.

1. American Council on Renewable Energy. Energy Fact Check. 2014. Retrieved from http://www.energyfactcheck.org/slideshow/even-with-massive-subsidies-renewable-energy-technology-cannot-survive-renewables-have-been-getting-subsidies-for-years-now-they-should-be-able-to-stand-on-their-own/

2. American Wind Energy Association. 2013. Retrieved from http://www.awea.org/Issues/Contect.aspx?ItemNumber=5453

3. Perry, Mark. American Enterprise Institute. September 2014. Retrieved from http://www.aei-ideas.org/2014/06/alternative-energy-sources-like-wind-and-solar-are-no-substitute-for-low-cost-zero-emissions-nuclear-power/

4.PBS News Hour Video. ENGR312 Lesson 2 Content.

 

 

Introduction to Stallard

Hello fellow students and Dr. Etienne. My name is Christine Stallard, and I will refer to myself as Christine (used professionally) or Christy (used in some circle of friends). While I grew up in Meadville, PA, I have lived nearly 35 years in the Pacific Northwest. For 25 years, my husband and I lived in Ephrata, WA, which is in the desert area of Washington state (yes, there is a desert there). We now live on the southern Oregon coast, near Pistol River which is about 30 miles north of the California border. My career, of nearly 30 years, has been in the electric utility industry. In Washington state, I worked for a public utility district that owns and operates two major hydroelectric dams on the Columbia River. I am now the marketing and member services department manager for a small electric cooperative. I am passionate about the electric utility industry and my career in the industry has been interesting, exciting and rewarding. I am pursuing an undergraduate degree in Energy and Sustainability Policy because I feel it is very relevant to what I have done professionally during my career. In particular, some of my most rewarding experiences during my career have been in the area of government affairs, so the focus on sustainable policy was very intriguing. While this course is a requirement for the ESP degree program, I think the focus on entrepreneur possibilities is also intriguing.

I started a limited liability corporation in 1999 where I was a sole proprietor consultant offering public affairs and strategic planning services in areas related to natural resources, hydropower, electric utility issues (including wind generation and Federal Energy Regulatory Commission hydropower licensing), political campaigns and agriculture. I haven’t given much thought in the past to the final question about what type of business might have a significant impact in the renewable energy world, but I think it might be a business that would figure out how to provide and market adequate battery storage so distributed generation might be more feasible.