The EnergyBiz Leadership Forum at the Mayflower in Washington on Monday and Tuesday of this week was well-attended and has been heavily covered in the media. My colleague Marty Rosenberg, editor-in-chief of EnergyBiz, and everyone else at Energy Central, did a marvelous job in putting together the conference.
I spoke with a large number of the participants and interviewed a dozen of them on videotape for Marty and EnergyBiz. In doing these interviews, I had to miss a significant portion of the conference, but attended what sessions I could and also had an opportunity to ask the speakers about what they had said.
One of the constant themes of the conference was that energy prices for average consumers are going to go up sharply in the next couple of years as the Obama Administration and the huge Democrat majority in Congress embrace the most radical of environmentalist positions including Cap and Trade—probably with all allowances auctioned. Even Rep. Bart Gordon, D-Tenn., chairman of the House Committee on Science and Technology, admitted when I interviewed him that prices will be going up, though he wouldn’t guess at a percentage. I heard numbers everywhere from 15 percent to more than 100 percent for the projected increase in electric rates.
All this is based upon dubious “consensus science” and computer modeling claiming that CO2 is causing an unnatural Global Warming. “Consensus science” isn’t science, it is politics and politics from the far-left and radical environmentalists. I still don’t understand their motivation for this political movement, unless it was just to get into power. That they have accomplished.
What the administration and Congress plan to do may or may not have any affect on the climate—responsible scientists disagree on that point—but it will have a tremendous economic and social effect, regardless of the science. Despite demand response, AMI, smart grids, renewable energy, new transmission, the so-called “stimulus package” and all the other massively expensive requirements being piled on the industry, there are two irrefutable facts (no one, not even Gordon, denied these):
1. Americans are going to have to pay increasingly much higher prices for electricity, prices many of them will not be able to afford.
2. They aren’t going to be happy about it.
There are some other facts that are debatable, but likely are true:
1. All of this is going to make it increasingly difficult for utilities to generate or buy sufficient power to prevent blackouts and brownouts—one of the effects predicted specifically by one of the prominent Forum speakers.
2. The federal government, not free-enterprise, or even common sense, increasingly is going to be in charge of our electric system. States, even PUCs, are going to see their power to control rates, or much of anything else, evaporate if Obama/Congress get their way.
3. The Obama Administration is going to give us a third-world electrical system at much higher costs for everyone.
4. With the economy already in the worst shape since the Great Depression, all of this deficit spending and requirements for utilities to match funds likely will make things worse than in the 1930s.
5. Obama claims he is going to revitalize the economy by a complete restructuring of the electric industry. More likely, he is going to destroy it and the industry.
Well-heeled environmentalists (Al Gore) and the rich will have plenty of electricity and money. The rest of us will have to get along with less of both until people get so upset they take matters into their own hands--at the ballot box or elsewhere. There are is perhaps 20% of the population, accoreding to various polls, even some by environmental organizations, who are all for this. The other 80% has no idea what is about to hit them, as one prominent Forum speaker said.
It is personally gratifying for me to see many industry professionals now recognizing the consumer rate hike crisis looming that I have been blogging on this website about for months now. Please don't get me wrong, as a consumer I won't like it as much as the next person or yourself, but I have to live in the real world like everyone else.
Just ask your local dry cleaning shop, or auto manufacturing plant what the impact of a doubling or tripling of electricity rates will have on their businesses. If we think our economy is in a crisis now with jobs being lost, we haven't seen the worst yet by far.
If Obama is sincere in his goals, the huge sums of extra money about to be sucked out of consumers' pockets better be re-invested back into the economy to somehow to create new employment. And even if it is, consumers will wake up and look more than ever before for new ways to minimize their electricity bills without draconian measures like working in the dark.
It used (not was) to be that there were a few environmenlists. Things have change a lot. For example, take a look at todays news headlines "World's leading scientists in desperate plea to politicians to act on climate change - The world's leading scientists yesterday issued a desperate plea to politicians to act on climate change, amid warnings that without action the world faces decades of social unrest and war."
That is the sorts of things we find now leading to the post Kyoto negotiations (for details see the Internet link http://www.telegraph.co.uk/motoring/environment/49... ):
At an emergency climate summit in Copenhagen, scientists agreed that "worst case" scenarios were already becoming reality and that, unless drastic action was taken soon, "dangerous climate change" was imminent.
In a strongly worded message that, unusually for academics, appealed directly to politicians, they said there was "no excuse for inaction" and that "weak and "ineffective" governments must stand up to big business and "vested interests".
Steps should be "vigorously and widely implemented", they said, to reduce greenhouse gases. Failure to do so would result in "significant risk" of "irreversible climatic shifts", the statement added.
The plea came as Lord Stern, the former chief economist of the World Bank whose report two years ago drew attention to the possible results of global warming, told the conference that unless politicians grasped the gravity of the situation it would be "devastating".
I'm old enough to remember when "cool-headed scientists" in the 1970s were warning of a new Ice Age just around the corner. That didn't happen, neither will catastrophic Global Warming. I'm actually quite a believer in responsible science. The scientific method is a very sound manner of discovering facts about the universe of which we are an infinitessimally small part. But I care so much about science that I resent very much its being hijacked for political purposes. That is what has happened in this case to the very great detriment of truth and sound public policy.
It is interesting to note that British Petroleum and Shell Oil Co. are now on different sides of the spectrum than Southern, Massey Energy and Chevron, which are among nine 'Climate Watch' companies targeted by investor. Shell has said that debate is over and BP chief scientist, Steven Koonin (SK) said that cutting greenhouse emissions will take major changes.
Among those mayor changes, potential high electricity prices can be mitigated by a policy that removes the uncertainty for most customers and investors. Invest to develop the resources of the demand side with a policy to delay the GHG price increases. Please see the EWPC article "How to Increase the Leverage of Stimulus Bill to Global Green Energy" by hitting the Internet link http://www.energyblogs.com/ewpc/index.cfm/2009/2/1...
The delay is critical to enable the leverage of the reform. For example, using the stimulus to increase energy efficiency, before GHG price increases take effect, will result in much lower energy costs for customers which can be redistributed for years to come as price increases have at least a neutral effect on costs.
The delay is critical to give certainty on investments today. For example, knowing that environmental costs will triple in a few years, investment in clean energy will have the right incentives for innovation.
Best,
W.
As you may know, in generative dialogues important and intelligent people are separated from their opinions. I respect very much you, but some of you skeptics opinions may be wrong and outdated. As you realized from your second post about the wiki, there was not attack at all. In order not to hurt your feelings, I read the wiki discussion before posting because it says so at the beggining of the main entry.
Please don't forget to read the other important issues that follow in my message. Oil companies are divided already. Scary numbers are everywhere in the globe, as population growth, energy poverty, competitive cheating by electric prices based on pollution, etc. are increasing and unsustainable.
Regards,
Jose Antonio
I have been predicting an electricity rate crisis for months now to pay for carbon taxes or cap & trade schemes, and to pay for the massive refurbishments of the grid needed in the US just to keep it where it is now let alone any growth in capacities. I agree the looming rate hikes will be unsustainable, leading to more defaults on utility bills by consumers and more business failures. Another result of this stark reality will be much greater adoption of distributed local generation with private investment in it, because these forms of generation are much easier to get investors to buy into than building new large central generators.
You need to take a look at the EWPC article "Just as Pogo, IOUs Found the Enemy" at the Internet address http://www.energyblogs.com/ewpc/index.cfm/2009/1/2... to understand the context which makes that "for every dollar spent on electricity, consumers are spending at least 50 cents on other goods and services to cover the costs of power failures." The central stations are just unable to get the right kind of power performance that customers need.
It is easy to forecast rising prices, but not the need for the proper reform. In my first EWPC article, back in September 2007, "EWPC Superiority in Carbon Emission Reductions," located at the internet address http://www.energyblogs.com/ewpc/index.cfm/2007/9/1... is it very clear that deregulation amplifies fuel prices into higher customer's electricity costs, vertical integration with no reduction of fuel use just transfers fuel costs to customer, while EWPC mitigates fuel prices into lower customer's electricity costs by developing the resources of the demand side.
As IOUs met the enemy, EWPC is their only way out.
I admit it's been easy for me or anyone else to predict rising prices, as it only takes some common sense of a consumer like myself. The need for "proper reform" is also agreed not so easy. I will also recognize that attempts at deregulation of prices have failed in the past, and vertically integrated utility companies don't do anything to protect consumers from fuel prices either.
Here in Ontario we have eliminated the vertically integrated utility companies such that all local distribution is handled by local distribution companies (LDCs) who have no generation functions. They are still monopolies in that consumers must buy their electricity from just one LDC, and consumers' bills are split between energy charges that are a simple pass-through to all generators, and LDC charges for transmission and distribution. Transmission over long distances is handled primarily by Hydro One, and a small portion by some LDCs. The generators compete with each other to continuously bid in real time into a wholesale market run by our Independent Electricity System Operator. It is my understanding that Ontario's real-time wholesale market system for competing generators is now commonly practiced in much of the US too.
Deregulation of consumer prices would never work as long as consumers must pay for their energy into one pool of money collected by an LDC for redistribution to all competing generators. So in my view their can never be any retail competition until this changes.
By the way too, Ontario as part of their Green Energy Act legislation is proposing to allow LDCs the option to get into the generator business but only for local distributed generators under 10MW. The reasoning is that feasibility of any new local distributed generation is very site specific, and implementing it impacts only the LDC's local grid, so therefore an LDC should have the freedom to participate in owning such generators if they choose to.
Now here's the biggest news of Ontario's The Green Energy Act: it also proposes to allow LDCs to raise consumer prices to pay for any new consumer conservation projects if they choose to, spelling the potential end of uniform rates for all consumers in Ontario down the road. This in my view reads as a form of deregulation.
That seems to be a good synthesis of Ontario's system that garantees a low leverage solution for IOUs. The alternnative is in the EWPC article "How to Increase the Leverage of Stimulus Bill to Global Green Energy," that can be read from the Internet address http://www.energyblogs.com/ewpc/index.cfm/2009/2/1...
Sort of, but there are important contrasts. First of all, real time power trading in the US and Alberta (AESO) pre-dates Ontario. IESO opened up their market in 2002, while PJM, NYISO & ISO-NE all had functioning realtime markets before 2000.
Second, the US markets (PJM, NYISO, ISO-NE & MISO) have two-settlement (financial day ahead auction settled by physical real time) market mechanisms. ERCOT (Texas) and CA-ISO (California) are moving that way.
Third, the US markets all explicitly recognize transmission constraints in the pricing mechanism. The Canadian markets, including AESO, do not. Related to this, the US markets all have (or plan to have) a strong nodal component. IESO & AESO are both single zone systems and most closely resembles the current ERCOT configuration (four zone) in this respect. PJM has over 8000 nodes and MISO nearly 2000. Of course, the Pacific Northwest, Mountain West and Southeast do not have organized ISO/RTO markets.
A final important contrast is the differing roles of the states and provinces. Ontario, Alberta, Texas, New York and California all have unified regulatory regimes. Companies operating in MISO, ISO-NE & PJM all have a paper blizzard of widely differing state regulations and mandates to follow.
In my view, IESO and AESO should both consider introducing nodal pricing. An intermediate step would be to adopt the hybrid system in NY and New England. The single zone system fails to capture true marginal costs attributable to location. However, they both have model retail regimes.