My friend and former colleague, Dr. Peter Fox-Penner recently published Smart Power, an in-depth look at the policy and business challenges electric utilities face due to the combined impacts of climate change, the smart grid, and energy efficiency policies. Much of Dr. Fox-Penner’s book represents his years of dedicated research as well as the perspective derived from a career devoted to executive consulting, academic research and government service. The book provides a concise overview of the rapidly-changing landscape of the utility industry and how current challenges will shape its future.
Smart Power explains the multiple dimensions of this emerging industry transformation, including technological change, environmental pressures, new utility business models, transmission issues, and both state and federal regulatory implications, all of which are clearly laid out and thoughtfully examined.
The book is in part intended as a primer for policy-makers. As such, I wondered if it would be a bit basic for me, given that I’ve spent my entire career focused on the electric power industry (including a stint working with the author at Charles River Associates). However, I found the book not only enjoyable, but a thoroughly thought-provoking read. Even the "primer" parts served as a useful refresher, as I’ve been more focused on fossil-generation for the last 12 years. I particularly like the coherence of the scenarios and reconciling the two current business/structural models now co-existing with the notions of "Smart Integrator" vs. "Energy Services Utility."
Some Quotes of Note
While the text below does not substitute for reading the book, I wanted to highlight a few quotes that are capture the major crosswinds buffeting the industry:
On the outlook for future electricity demand:
“The future sales trajectory for electric power has never been so uncertain, spanning from growth above recent rates to gradual sales declines over the next several decades.
Over a million people immigrate to the US a year; by 2050 it will be two million. Even if we could keep per capita electricity use constant, as California has done for a decade, we would still increase total power sales by over 33%. Overall, electricity is gradually stealing market share from other fuels for the overall mix of applications we use in the US. In the residential sector, for example, electricity use is projected to grow six times faster than natural gas use through 2030.”
On the potential for electric and plug-in hybrid electric vehicles to add further to demand growth:
“With electric transportation products about to take off, the power industry must prepare for a role it has never played before: bolstering energy security by supplying power to an electrified transport fleet.”
On how transmission constraints could limit the role for renewables in meeting new demand and maintaining reliability:
“Transmission expansion could falter for any of the customary reasons, not to mention new ones and unforeseen problems. Another decade or two in which new transmission lags behind the need for new capacity will have dramatic consequences for the range of supply choices we can access. And now, more than ever, the more supply choices we have, the better.”
On carbon capture and sequestration for coal-fired generation:
“The question about carbon capture and storage (CCS) is not whether the technology works, it is about the cost and reliability at commercial scale relative to competing options. While it may be surprising, most of the main sequestration methods have been in use or large trials for some time now. So far, scientists think there is a 99% chance that properly sequestered carbon will stay put for a thousand years. Moreover, there appear to be more than enough sites with capacity to accommodate coal CO2 emissions for the next century or more.”
On the overall industry challenges and the dire consequences of not meeting them:
“The power industry is going to have to do it all over in the next 50 years. The estimated costs of this effort just until 2030 are somewhere around $2 trillion. Who is going to do all this? Regulated utilities? Public power? Deregulated generation companies? Will these challenges force companies to specialize in on part of the industry or to vertically integrate into all parts of the supply chain? Above all, does governing this industry properly through this period of upheaval call for changes in regulation and industry structure? How do we make a business out of all this change?
While we might hope that an industry this important will always find a way to keep the lights on, the same could be said of the financial sector that collapsed in mid-2008 with astonishing speed and momentous repercussions. Even within the power industry, a much smaller set of challenges ignited the California electricity crisis of 2000, bringing on rolling blackouts, bankruptcies, and billions of dollars of increased electricity costs. Getting it as right as we can is important -- for our climate, our economy, and our safety and national security.”
A Question on the Changing Elements of Future Demand
The book's treatment of the future’s electricity demand was comprehensive and well-documented, and clearly laid out the ever-more-daunting uncertainties around forecasting electricity usage. My take was that demand growth scenarios are for the most part econometrics-based but reconciled for different electric vehicle growth scenarios. There may be no other practical way to go about this, but I sometimes worry that the econometrics approach may fail to capture some important structural changes that are affecting electricity usage. This is acknowledged in the discrete treatment of electric vehicle demand. But the book alludes to another, more subtle, structural change by pointing out the number of electrical devices plugged into outlets in Dr. Fox-Penner's kitchen compared to his mother's.
My example would be the number of flat screen TVs I have in my house (too embarrassed to disclose actual number). These devices consume substantial electricity, sometimes even when they are turned off, and their adoption rate is exploding. When I was working on demand forecasting at the Washington State Energy Office we ignored so-called "plug load" because it was "noise." But I think these recent and accelerating trends may be creating a need to better reconcile econometrics and end-use forecasting. Unfortunately, due to busy schedules I haven’t had an opportunity to discuss this issue any further with the author.
All in all, Smart Power is an excellent way to obtain a thoughtful and coherent view of the huge technical, legal and regulatory challenges that currently face electric power and shape the future of our society that depends on affordable, reliable and environmentally-acceptable electricity. I highly recommend adding it to your Amazon.com Wish List.
www.neuco.net/blog
To view the book online; http://www.islandpress.org/smartpower/
There are no comments for this entry.