EnergyBiz - January February 2011

CFOs WRESTLE WITH DOWNTURN
predictions For 2011
Volume 8 // issue 1 Jan 11 // Feb 11 energybiz.com
people // issues // strategy // technology
TRANSELECTS BIG SPLASH

Will it push oFFshore Wind?
What you need to knoW about the Future oF energy
T&D FOR A NEW ERA

tres amigas plans to transform the grid
COAL TAKES A BACK SEAT

more plant cancellations coming?
FUTUREGEN 2.0
is it a breakthrough proJect?
An E n E rgy C E ntr Al Pu b li C Ation
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January/February 2011
24
30
Features
50
Departments
o u r tA k E
20 Game Changers
Transforming the Energy Landscape
4 bring on game change 6

lEt tErs
24 Coal Takes a Back Seat

Huge $6 Billion Project Delayed
FinAnCiAl Front
8 russias nuclear ambitions 10 cFos Wrestle with the downturn 13 the marvelous marcellus 15 business transformation of smart
grid
28 An Energy Roadmap
200 Nuclear Plants by 2050
T &D for a New Era

30 a highway for the 21st century
Tres Amigas Plans to Transform the Grid
tECh FrontiEr
50 Futuregen 2.0 52 boosting nuclear Fuel 53 koreas superconducting highway

MEtriCs
34 new approaches to solar deployments

Subsidies Kick In
54 power boost, greenhouse gas

reductions lauded
i ntrod uC i n g : rob E r t l . M itC h E ll
36 hawaiis solar challenge

Big Renewable Integration Under Way
55 trans-elects big splash 56 going deep for Wind

l E g A l E Ag l E
37 solar as commodity
The Value of Price and Convenience
Vol. 8, No. 1. Copyright 2011 by Energy Central. All rights reserved. Permission to reprint or quote excerpts granted by written request only. EnergyBiz (ISSN 1554-0073 ) is published bimonthly by Energy Central, 2821 S. Parker Road, Suite 1105, Aurora, CO 80014. Periodical postage paid at Aurora, Colo., and additional mailing offices. Subscriptions are available by request. POSTMASTER: Send address changes to EnergyBiz, 2821 S. Parker Road, Suite 1105, Aurora, CO 80014. Customer service: (303) 782-5510. For change of address include old address as well as new address with both ZIP codes. Allow four to six weeks for change of address to become effective. Please include current mailing label when writing about your subscription.
60 pipeline proliferation 62 look back

F i n A l tA k E
64 a nuclear Jolt
E n E rgyb i z
EC
H N OLO
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OVEN PR
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SM
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Vaporware
With margins getting tighter and consumer demand rising, the last thing your utility needs is a commitment that cant be achieved. Thats why you should say yes to a partnership with Elster. With over 170 years of utility experience, more than 80 field-proven Smart Grid deployments and 200 million endpoints, you can trust Elster to provide real, proven solutions that will take your utility forward for years to come. For more information about Elster and the Smart Grid, contact us at: 1.800.338.5251 or Elster.com/DistribuTECH
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OuR TAkE bring On Game Change

on a variety of renewable and fossil fuels. When Power in a small box? Fuel cells w ill the company had its initial public offering of stock never multiply to the point of offering an alternaearlier this year, Gov. Arnold Schwarzenegger and tive to centralized, large, power-generation plants. Nuclear power is too difficult to finance in todays Colin Powell were on hand, as was John Doerr, the noted venture capitalist who helped launch Google. economic climate. Doerr has hailed Bloom Energy as a disruptive Sunshine may be free but solar power is far from technology. being commercially viable. The Washington forum will also showcase NuScale Such is todays conventional wisdom in the Power, which has developed small, 45-megawatt energy industry. nuclear modules that are scalable into 540-megawatt But conventional thinking could be dangerous units. Secretary of Energy Steven Chu has opined in these times of economic stagnation and political in the Wall Street Journal, If we can develop this and policy gridlock in America. technology in the U.S. and build these reactors with With Washington under siege for years to come American workers, we will have a as a result of our nations chronic PlEAsE rEAd My wEEkly key competitive edge. federal deficit, the profound insights FridAys At www.energybiz.com. The forum will also feature change needed in our energy SolarCity, which has pioneered sector is not likely to be nurtured a business model that puts solar on homeowners top-down by federal largesse. rooftops where it will crank out electricity that costs Rather, the future will belong to grassroots entreless for the consumer than conventional power streampreneurs who will come up with the technology to ing out across a metropolis, courtesy of distant coal, totally transform how we put the glow into our bulbs natural gas or nuclear-powered generating stations. and the song into our iPods. The company serves 500 communities in Arizona, Leading an annual energy conference, much like running a magazine, offers me a wonderful blank canvas California, Colorado, Oregon and Texas. Lyndon Rive cofounded SolarCity just four years ready for bold strokes that promise to captivate. ago, the latest of a string of efforts that started with Mindful of that opportunity, we have put the very first company he founded in South Africa the finishing touches on the third annual at age 17. Rive will be speaking at the forum, along EnergyBiz Leadership Forum to be held with Bloom Energy leader K.R. Sridhar, Jay Surina, a in Washington February 27 March 1, top executive of NuScale Power, and many others. www.energybizforum.com. The three will tell the intriguing story of why fuel The theme of this years event is cells, small-scale nuclear projects and solar power Energy Game Changers. may be among the game changers that will forever It will be about companies like Bloom alter our energy future. Energy, which has developed what it As fascinating as each of their stories may be, says are among the most efficient energy there is an even more intriguing subtext to the generators on the planet. message that they will be bringing to you, our The company, a decade old, EnergyBiz community. was cofounded by K.R. Change is not only possible, but also inevitable. Sridhar, a renowned And anyone who wants to make energy their lifes work scientist noted for his needs to be at what promises to be the most riveting, work on Mars flights inspirational event in the industry this year. and exploration. Fortune magazine hailed him as one of the top five futurists inventing Martin Rosenberg, Editor-in-Chief tomorrow today. The Bloom technology runs
4 E n E rgyb i z
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Advanced metering infrastructuresmart gridautomation demand responsemeter data managementstimulus grants regulatory hurdlescustomer acceptancestandardsreturn on investment
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LETTERS
On balance, most utilities will wait and see. Let Southern Company plans for Vogtle 3 and 4 go forward and maybe a few more projects will use the loan guarantees. But I dont think you will have more than a handful of new nuclear plants in the United States in the next 10 years. After that it will depend on how the first round went and the price of natural gas or another alternative. What could boost new nuclear projects in the United States? A cap and trade agreement or a carbon tax, which is now very unlikely after the recent elections, or environmental problems with fracking or other issues that will constrain natural gas supplies. Or perhaps China will developing a low-capital-cost reactor with a short construction schedule.
Thomas Grant Midwest Research Institute Kansas City, Mo.
editOr-in-ChieF Martin Rosenberg mrosenberg@energycentral.com 913.385.9909 ChieF COPy editOrs Don Bishop, Martha Collins seniOr COntributOrs Phil Carson, Editor-in-chief, Intelligent Utility Daily pcarson@energycentral.com 303.228.4757
J. Christopher Perdue, Vice President, Sierra Energy Group cperdue@energycentral.com 850.499.8727 Bill Opalka, Editor-in-Chief, RenewablesBiz Daily bopalka@energycentral.com 860.633.0090 Ken Silverstein, Editor-in-Chief, EnergyBiz Insider ksilverstein@energycentral.com 304.345.5777
Feature Writers Steve Barlas, Lisa Cohn, Pamela Coyle, Darrell Delamaide, Richard Korman, Paul Korzeniowski, Salvatore Salamone, Gary Sampson, Al Senia, Richard Schlesinger, Gary Stern seniOr ViCe President, Media Betsy Kominsky bkominsky@energycentral.com 303.228.4762 ViCe President OF saLes, MarKetinG serViCes Jennifer LaFlam jlaflam@energycentral.com 303.228.4752 ViCe President, inteLLiGent utiLity diVisiOn Mark Johnson mark@energycentral.com 303.228.4721 direCtOr OF MarKetinG & PrOduCtiOn Sarah W. Frazier sfrazier@energycentral.com 303.228.4733 MarKetinG COMMuniCatiOns ManaGer Brenda Roode broode@energycentral.com 303.228.4763 MarKetinG COOrdinatOr Casey Bohannan aCCOunt exeCutiVes Todd Hagen, Alexsandra Lemke, Ken Maness, Jean Micketti sales@energycentral.com 303.782.5510 x100 adVertisinG COOrdinatOrs Stephanie Wilson, Eric Swanson teChnOLOGy ManaGer Dan Wilson CirCuLatiOn CustOMer serViCe Cindy Witwer biLLinG Monica Coffey enerGy CentraL www.energycentral.com President/CeO Steve Drazga ChieF OPeratinG OFFiCer Steven D. Solove
I would like to make some comments that supplement your recent nuclear coverage, New Nuclear Thinking [November/December], based on my understanding and personal experience of what prompted nuclear power to expand and then contract 30 years ago. I was involved with 29 nuclear power plants in five different countries. You need to understand the past history of nuclear which few people either pro or con nuclear really do to get a real feel for its possibilities. It is always difficult to predict the future and I take all predictions with a skeptical view. Granted the winds of change are more favorable to nuclear than any time in the last 30 years but does that translate to a Nuclear Renaissance? Yes in Asia. With more than 40 reactors under construction, the nuclear action is clearly in Asia. What about the United States? I have been through this before and so I am a lot more skeptical. What is driving nuclear in the United States is the need for an alternative to coal for baseload power and the projected cheaper nuclear levelized costs. What is holding nuclear back in this country? High capital costs, financial risks, lack of load growth, and the price of natural gas.
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I enjoyed reading your editorial Backing off Coal in the Nov/Dec issue. I can relate to your phrase My youngest son asked me. My youngest son, now 11, is full of curiosity, ingenuity and questions. He has that engineer gene and is always interested in knowing how things work. He likes taking things apart to understand how they are built. He loves fixing things with duct tape. Maybe someday my youngest son will help us with our energy challenge of reducing coal usage. If nothing else, I can see him someday driving a Prius.
Joe Koch ITC Holding Corp. Dubuque, Iowa
2821 South Parker Road, Suite 1105 Aurora, CO 80014 Phone 303.782.5510, Fax 303.782.5331
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to contribute to the letters column, please e-mail your submission to energybiz.editor@energycentral.com. provide your name, address and daytime phone number. letters may be edited for style and length. adVertisers Media kits are available by calling 303.782.5510 or e-mailing sales@energycentral.com.
Siemens AG, 2011. All Rights Reserved.
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FiNANCiAL FRONT russias nuclear ambitions

PUSHING ExPORTS // By GARy SAmPSON
russia is continuing its Policy oF
vigorously pushing the export of all things pertaining to nuclear energy production. The year 2010 proved to be a good year for business. The past year has witnessed multibillion-dollar nuclear power plant sales to countries ranging from Venezuela to India and from China to Turkey. Russia is building 15 of the 60 nuclear reactors currently under construction in the world. Russia itself has some 31 nuclear reactors in operation and plans to increase that number to 59 in the near future, nearly doubling power output by 2020. Concern over the 1986 disaster at Chernobyl no longer appears to be a major factor in nuclear power plant sales as the current technology of the Russian nuclear industry is acknowledged to be on a par with any in the world. Russia was the first country to have a nuclear power plant producing electricity. That was in 1954 at the Obninsk reactor. The similar, but less serious nuclear event at Three Mile Island in Pennsylvania in 1979 turned much American public opinion against nuclear power. The Russian nuclear power industry, being less influenced by public opinion, continued working on improving nuclear power technology and has now fully caught up with current practice. Some of the success may be due to special technologysharing agreements with russiA And Western and Japanese bulgAriA companies. In 2009, a russian company has signed an agreement the Russian Atomic with a bulgarian utility Energy Power Corp., to proceed with plans to Atomenergoprom, signed build a 2,000-megawatt nuclear plant in belene, a framework agreement bulgaria, that had been with Japans Toshiba for stalled for political reasons. collaboration in the development of nuclear power technology. Toshiba purchased Westinghouse Electric in 1996 for $5.4 billion and Westinghouse technology is the basis for about 50 percent of the worlds operating commercial nuclear power plants. The Russian-Japanese agreement centers on the design and engineering of commercial nuclear power plants and related equipment. Another joint technology agreement is with Germanys Siemens. Siemens will provide turbines for Rosatom, the Russian state-owned nuclear corporation. Siemens
8 E n E rgyb i z
and Rosatom will work together on developing designs for new nuclear power plants and upgrading the efficiency and lifespan of existing plants. The Siemens agreement is expected to be finalized in 2011. Russia is currently working on a project to extend the life of existing Russian nuclear power plants beyond their designed 30-year limit. With confidence in the quality of its product, Russia hopes to supply a significant percentage of the world demand for new nuclear power plant capacity, which is expected to grow by about 300 gigawatts between now and 2030. Russia plans to be rid of environmentally harmful fossil fuel power generation by 2050 by using the new type of fast reactor nuclear plants. Russia markets its state-of-the-art nuclear products with a host of special incentives for customers. At the top of the incentive list is price. Russian 1,000-megawatt plants cost an average of $2.9 billion in Russia, less financing. This price is 20 to 50 percent below the Western norm. The low prices are being challenged now by a consortium of South Korean manufacturers. The Korean consortium, led by Korean Electric Power, KEPCO, recently beat out both Frances Areva group and a joint venture between GE and Hitachi to win a $20 billion contract in the United Arab Emirates. The Koreans came in at 20 percent below their competitors. Not all deals are simple sales to a customer. Russia will retain ownership of the $20 billion project to build Turkeys first nuclear power plant, to be located on the countrys southern coast. The Russian entity running the plant will be Atomstroyexport. Local sale of electricity will pay for construction of the plant. The four reactors, each with a capacity of 1.2 gigawatts, are expected to begin operation between 2016 and 2019. The Turkish government pays nothing up front. When the plant is finished in seven years, Atomstroyexport will be free to sell up to 49 percent of the business to investors. The Russians have another distinct advantage in that their contracts usually include an agreement to bundle the complete fuel-cycle supply with plant construction. Among competitors, only Frances Areva does the same. This means the Russians will supply the low-enriched uranium used to fuel the plant and take the spent fuel back to Russia. In a
sense the fuel is leased to the users of the plant. Spent fuel is a product in itself. It can be reprocessed in various ways, making it valuable for use in fast neutron reactors. Supply of nuclear fuel to any power plant, not just
Russian-built ones, is an important Russian business in itself. Rosatom or its subsidiaries supply 30 percent of the nuclear fuel used in France, 100 percent of the fuel used in Switzerland, and about 45 percent of the fuel used by American utilities. Ten percent of all electricity in the United States is generated by uranium material taken from decommissioned Russian nuclear weapons. This is the result of the Megatons to Megawatts agreement between Russia and the United States. Both countries have been converting bombs into reactor fuel, but the agreement expires in 2013. Russia has about 40 percent of global uranium enrichment capacity and supplies 17 percent of the nuclear fuel used around the world at the present time. Rosatom hopes to increase its market share to 25 percent by 2025. Russia does not have to rely on its old nuclear weapons alone for uranium. In June, Russia purchased a controlling interest in Canadas Uranium One mining and exploration company for $610 million. This acquisition, along with Russias proven 8 percent of the worlds uranium reserves, should ensure a reliable, continuing supply of fuel. Low prices and waste management agreements are not always enough to make the sale. The contract signed in March between Russia and India called for the construction of 16 nuclear reactors in India six to be completed by 2017. Russia is also to throw in 29 new fighter aircraft, an unspecified number of new transport aircraft, and a refitting of an Indian aircraft carrier. There is also a further difference from the usual contractual arrangements in that the Indians do not have to return the spent fuel. According to a study carried out by the Kennan Institute in 2008, the Russian energy industry was renationalized after the collapse of the Soviet Union. The oligarchs and Soviet-era bosses who had taken over after the end of the 1980s were replaced and many energy industry assets went back under state control. The level of state control went from about 10 percent in 2000 to about 50 percent in 2007. Given the Russian economys high level of dependence on oil and natural gas, the Kennan study concluded that Russia is a virtual petrostate like Saudi Arabia. If we include nuclear energy production in the equation, Russia could perhaps be called an energystate.
EnergybizMag.com E n E rgy b i z 9
FiNANCiAL FRONT CFOs Wrestle with the downturn

THE VIEW FROm SAN FRANCISCO TO NEW yORK
utility chieF Financial oFFicers are
on the front lines dealing with the miserable economy that has settled over the United States. To view the current economy through their eyes, EnergyBiz asked CFOs around the country, Given how our economy has performed in the past two years, what are your main concerns and hopes as a utility CFO as we enter 2011? Their responses, edited for style and length, follow.
charles eldred
The recent poor performance of the economy has created a heightened sense of accountability for regulators, utilities and investors in achieving their respective goals. Regulators have become more focused on the affordability of energy services for customers. Utilities have become more cautious in making investments; utility managers, just like regulators, are aware of customers limited ability to absorb rate increases. Investors are under more pressure to make prudent choices that meet their risk/return goals. Regulators, utilities and investors are struggling to achieve their goals with the added pressure of the down economy, but I believe this struggle has become fundamental to the utility business and wont disappear once the economy improves. tVA CEo PAy Energy costs will rise the tennessee Valley for consumers, utilities will authoritys chief executive should not need to make investments, receive a raise that and investors do need triples his salary, according to a county clarity around recovery. commissioner in The down economy tennessee. the tVa said that is not the only source the raise is warranted of uncertainty for the for competitive reasons, industry. The uncertainty the Chattanooga Times reported. is also caused by the lack of a clear and consistent energy policy, the growing sophistication of energy consumers, and changing technology. Regulators may want to keep rates low, but investors will not support the industry if recovery of their investment becomes too risky. Utilities may want to be cautious in their investments, but some investments
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are required by legislation or regulation to support environmental goals, and regardless of how difficult it is to estimate load growth in a down economy, utilities still have an obligation to reliably serve their customers. Investors may want clarity, but the entire utility industry has a shifting risk profile as inconsistencies in energy policy, unpredictable regulatory paths and hazy growth prospects make it less certain that investors will recover their investments with a fair return. My chief concern is that the heightened accountability wont lead to recognition of these long-term issues and how poorly these issues are addressed by the traditional regulatory model. Ultimately, everyone has the same goal: ensuring value in meeting the evolving needs of energy consumers. Traditional regulation models are not providing the clarity that any of these groups regulators, utilities or investors need in meeting this goal. That indicates to me that pretty dramatic regulatory reform, at both the state and federal level, is necessary. My hope is that the heightened accountability that has resulted from this down economy is recognized as shared accountability and shared dependence, and that real reform takes place to ensure a fair and reasonable outcome that supports the goals of regulators, utilities and investors while achieving value for the consumer.
Charles Eldred is executive vice president and chief financial officer, PNM Resources.
kent harvey
As we think ahead to the financial climate for 2011, our focus is principally on our customers and the pressure Californias sluggish economy is putting on households and businesses. Californias unemployment rate remains over 12 percent, almost 3 percent higher than the national rate. The good news is that were seeing signs of stabilization. For example, our electric usage for the third quarter was just about flat when adjusted for weather and the timing of meter reads, versus a drop of about 2 percent in the third quarter last year. Other positive signs we are watching include improved housing prices, steady housing starts and small increases in overall employment levels.
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FiNANCiAL FRONT
As a result, were cautiously optimistic that the broader recovery will gain momentum next year, providing much-needed relief for customers. This should be helped by the fact that we believe we can keep electric rates for our customers essentially flat in 2011. And while our revenue collection is decoupled from sales, an improving economy means more people returning to work and we would expect to see growth in electric sales in our service area and the nation overall. With regard to the outlook for investment, we anticipate that Californias regulatory climate will continue to be constructive under the new governor, with ongoing support for policies that support investments in clean energy infrastructure. Given recent low interest rates, well be watching closely for trends in the next year or so. One hope is that well also see greater regulatory support and clarity from the federal level, which we believe could help to spur new investment throughout the sector. Most immediately, this includes resolution on dividend tax policy. And although the outlook for comprehensive climate and energy legislation has dimmed, we believe there are some opportunities for bipartisan agreement, from investments in energy efficiency to support for electric vehicles.
Kent Harvey is senior vice president and chief financial officer, PG&E.
robert hoglund
The health of the local economy is a primary determinant of our customers energy consumption. Two years ago, the economy was in freefall and New York City was first over the edge. Based on prior experience, economists were predicting that New York City, disproportionately dependent on Wall Street, would lose some 330,000 jobs from a base of 3.8 million. From the time the recession hit the city in August 2008 until hiring resumed at the beginning of this year, New York City lost far fewer jobs, just 184,500. This was a better statistic than for the United States as a whole, which has lost 8.4 million jobs, a decrease of 7.3 percent. Private employment has been up each month this year compared with last year, led by the gains in professional and business services, education and health care. Customers consumption of electricity this summer bears out the demand signal in the employment numbers. We had both record temperatures and record usage. July set a record for electric
12 E n E rgyb i z
delivery volumes of 6.9 million megawatt-hours, eclipsing the previous record set in July 2008. Yet, no single-day records for peak consumption were set. The absence of a new peak reflects customer response to our calls for conservation. Customer response to our energy conservation efforts will play a critical role as we plan for future demands on our delivery systems. During the past year, we have developed a long-range business plan that we will be sharing with the public in the next several months. The plan is predicated on the following assumptions: As the recession ends, economic growth will be moderate; and electric peak consumption will continue to grow despite increased demand-side management and energy efficiency programs. These programs will be sponsored by both the company and the state government. Our long-range plan forecasts annual electric demand growth of about half our historical rate, or approximately 0.8 percent each year, due to our customers smarter use of energy. Lower demands will help reduce infrastructure costs from what they would otherwise be. Customer demands for gas will be greater, growing at 1.2 percent annually, as our customers choose gas as the preferred fuel to heat their buildings. Change is happening in the energy delivery business, and it creates opportunities and challenges. Everyone knows that living and doing business in New York City is expensive. The cost pressures on Con Edison are multiplied because we operate equipment beneath city streets. It is therefore important that we minimize costs to provide service to our customers. Encouraging our customers to
one hope is that well also see greater regulatory support and clarity from the federal level, which we believe could help to spur new investment...
Gatherings//Financial Front
Feb. 27 march 1 march 4-5 energybiz leadership Forum mit energy conference
Washington boston
For more information about these and other events, please visit www.energycentral.com/events.
use energy more wisely helps to defer the capital costs that come with higher use. Our demand-side management and energy efficiency efforts, plus other internal efforts directed toward sustainability, have earned us some recognition. In September, Con Edison was once again selected as a component of the Dow Jones Sustainability Index for North America, and the Carbon Disclosure Project announced that we are ranked number one among all S&P 500 companies in their leadership index. Customers will continue to demand more of our services and we will need to find new ways to deliver our services with fewer assets.
Robert Hoglund is senior vice president and chief financial officer, Con Edison.
The Marvelous Marcellus

THE CENTURy OF NATURAL GAS By DAVID P. DyER
there is much Press about the current
maria pope
I am optimistic as we approach 2011, especially in light of the difficult economic conditions that we and our customers faced in 2009 and 2010. During the past two years, our weather-adjusted loads decreased more than 4 percent and Oregons unemployment rate has been higher than the national average, peaking at approximately 12 percent in mid-2009 and remaining high at the current rate of 10.6 percent. Today, however, I am encouraged by signs of growth in the high-tech sector, solar manufacturing and traditional commodity businesses. Recently, Intel announced an $8 billion investment, significantly increasing its research and development center in Oregon. During these difficult times, we have focused on reducing costs and leveraging technology to increase our productivity and efficiency across Portland General Electric. Numerous projects have delivered bottom-line savings, resulting in largely flat operations and maintenance costs and better service and reliability for our customers. This important work will increase its pace in 2011. With the completion of our 2011 general rate case, we have aligned customer prices with the economic conditions of our service territory and received recovery of costs essential for safe and reliable service while significantly reducing investors risk in our business. PGEs earnings outlook is good and we expect to achieve a competitive return on equity close to the 10 percent allowed by the Oregon Public Utility Commission.
Maria Pope is senior vice president of finance, chief financial officer and treasurer, Portland General Electric.
U.S. natural gas glut. The glut wont last for long. According to astrophysicist Michio Kaku, if the world economic growth rate averages 3 percent annually, within a century or two our civilization will need to master all forms of terrestrial energy and harness the potential resources of the entire planet including modifying the weather, mining the oceans, and extracting energy from the center of our planet. Kaku reminds us that mankind has slowly been decarbonizing our sources of energy since we first harnessed the power of firewood, evolving from coal to oil, and now natural gas. With the recent combined technology breakthroughs in horizontal drilling and slick water fracking, this century will be the century of natural gas as we slowly evolve to the yet-to-be-determined next major source of energy. If this is the century of natural gas, why are gas futures prices hovering at 10-year average low prices of $4 through 2011? No doubt, demand has eroded in the past two years as a result of the severe recession the United States is tepidly exiting. However, the market is excessively discounting gas prices due to the anticipated huge growth in supply from shale gas technology. This discount is too deep. Based on recent major oil company acquisitions, it is clear the Marcellus shale is the mother lode of natural gas in the United States, now estimated to be the second-largest gas reserve in the world with more than 500 trillion cubic feet of estimated recoverable reserves. To get a sense of what impact Marcellus shale drilling might have on gas supplies I tried to figure out how many new Marcellus shale horizontal wells it would take to add 1 trillion cubic feet of annual gas supply for a country that consumes about 23 trillion cubic feet per year about a 4 percent increase in supply. I based my numbers on a conversation I recently had with the chief geologist of one of the major players in the Marcellus. He said that current drilling successes indicate new Marcellus wells can average as much as 2 million cubic feet
EnergybizMag.com E n E rgyb i z 13
FiNANCiAL FRONT
per day for first-year production and may level off in the 500,000 cubic feet per day range after four to five years. This means that 1,370 new wells can produce 1 trillion cubic feet of gas in their first year of production. It will take about 5,500 mature wells at 500,000 cubic feet per day to produce 1 trillion cubic feet of gas annually. At 300,000 cubic feet per day, you need more than 9,100 mature shale wells to produce 1 trillion cubic feet annually. Considering the entire exploration and production industry has drilled about 2,000 wells in the first four years of drilling the Marcellus, and a little over 1,000 wells are expected to be permitted and drilled annually over the next two years, I would hardly view the Marcellus as the cause of the current gas glut. In the meantime, President Barack Obamas recently lifted, but still effective, moratorium on deepwater drilling in the Gulf of Mexico will reduce gas supplies coming from the Gulf in the next 12 to 24 months. In addition, $4 per gallon gas makes many land-based gas fields in North America unprofitable and drilling in those fields is slowing down quickly. Like the Feds interest rate moves, it takes 12 to 24 months for these events to work through the system. The economic and environmental benefits of natural gas as a primary source of energy are compelling. Gas emits half of coals carbon- based pollutants. At $4 per thousand cubic feet, gas sells for the energy equivalent of about $26 per barrel of oil at a time when oil is selling for more than $80 per barrel. You can fill an energy-equivalent compressed natural gas fueled-car for about $7 per tank versus $45 for a 15-gallon gasoline fill. Obama recently acknowledged the vast potential of the natural gas resources in the United States. Aubrey McClendon of Chesapeake Energy stated in a 60 Minutes segment that we have recently proved up the equivalent of twice the oil reserves in Saudi Arabia with U.S. natural gas shale formations led by the Marcellus shale. It will take five to 10 years for the infrastructure and demand to catch up with the new shale gas reserves under development. This will be the century of natural gas as we aggressively and environmentally consciously develop these new reserves worldwide. As we do so, the United States can become almost completely energy self-sufficient in the next five to 10 years, generating vast wealth for our nation.
David P. Dyer is president of Alliance Affiliated Equities.
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Leadership Roundtable
From left: clayton burns, eric mewhinney, don Von dollen, camilo serna, John kelly and donny helm
photographs by dayna smith
business transformation of smart Grid

UTILITIES READy TO SEIzE ADVANTAGES // By mARTIN ROSENBERG
THE ParTiciPanTs
donny helm, manager of technology, oncor electric delivery camilo serna, director of strategic planning, northeast utilities John kelly, deputy director, galvin electric initiative don Von dollen, program director, intelligrid at the electric power research institute clayton burns, principal engineer for smart grid, national grid eric mewhinney, manager of innovation and sustainability, bc hydro
the widening dePloyment oF smart grids
is transforming the everyday work of utilities and creating new opportunities to develop new revenues and better manage assets. To better understand this ongoing, sweeping transformation, EnergyBiz sat down with a panel of experts at the recent GridWeek conference in Washington. The conversation, edited for style and length, follows.
EnErgyBiz How is smart grid affecting your day-today responsibilities?
There has been a chasm between where we were and where we have to get to, and it is a significant effort to try to get everyone onto the same page. Most of my efforts have been developing a strategy. In 2006, we created our first road map. And weve been evolving it ever since. burns My day-to-day activities are basically along the lines of doing end-to-end testing. We were concerned about interoperability. Two years ago, we decided that we wanted to take a look at a lot of different equipment that was out there and make sure it worked together. What I see smart grid doing, and whats really different, is that communications is an enabler. It allows all the different devices to work like a unified system. You get the value added. sErnA When the stimulus funds came, when there was a smart grid opportunity, I was asked to lead the efforts to get a proposal. We didnt get the funds, but we didnt stop there. We continued working. We focused a lot on what all the devices inside the home and on the distribution grid would mean, figuring out what kind of strategies and initiatives we would be putting in place.
MEwhinnEy
FiNANCiAL FRONT
Von dollEn We have focused on smart grid research for the past 10 years. We started off looking at visions and very long-term, futuristic views, and doing long-term research and development. And as the idea has become more prominent, we started to look at specific tools. So we do a lot of work on the standards and the evaluation of technologies. kElly Smart grids are about delivering innovative services that produce value to consumers.
pricing. Until dynamic pricing comes, the private sector is on the sidelines. The large variation in daily pricing, off-peak versus on-peak, creates a new savings opportunity that attracts investment. Once you send a daily dynamic price variation, you encourage innovators to invent all kinds of new tools. We see new intelligent software tools that will automate the customer response. We do not expect consumers to be looking at displays or turning off devices. Instead, intelligent devices will learn what youre doing, and change things in anticipation of where youre going. We see a host of new companies that will invent new services for consumers that
Are there new revenue opportunities associated with smart grid? sErnA Smart grid for us is a way to achieve certain goals. We provide customers choices in energy don Von dollen, epri use, including price options. It allows us to modernize the grid. We really see smart grid as a way to improve customer satisfaction. burns Im not sure if theres truly a new revenue stream. But in addition to the reliability and efficiency gains, what I see is it will give us the opportunity to work closer with our customers. sErnA We see a lot of the different policy goals that donny helm, oncor states and the federal government have. Transmission and distribution is at the center of a lot of the action. So we actually see this as a great opportunity. hElM Interoperability now means integrating outside our footprint. Were actually more in tune with the consumers and the other third parties that are working with us than weve ever been before. kElly What drives the consumer business is
EnErgyBiz
16 E n E rgyb i z
if we want to change behavior, we have to look at what approaches are the best ways of getting us to the end that we want.
produce sufficient savings to cover their costs once dynamic pricing is there.
EnErgyBiz Can you see a road map for making all this happen faster? Von dollEn There are a lot of pilots that are going on. But we still need to be doing more pilots. We need to look at different types of rate structures. If we want to change behavior, we have to look at what approaches are the best ways of getting us to the end that we want. EnErgyBiz How will utilities make eric mewhinney, bc hydro use of greater information about their assets? burns Its going to take a while for the utilities to understand exactly what they can get out of the information. If you look at the system of the future, you are not going to only have the meters as the end points, but upstream youre going to have monitors in your distribution trans-
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formers. As long as theyre all time synchronized, there is a host of new applications that are available, like calculating theft of power in real time and calculating efficiency in real time. That allows you to take a look at the health of equipment thats out on the line in real time. As utilities start monitoring this vast symphony of information thats going to start pouring in do they have the structure in place to maximize its use? Or are utilities going to have to restructure and create new organizations to make it happen? sErnA Its more John kelly, galvin electric about the type of initiative people that would be needed. Its more about the type of engineers that we will need in the future, the type of training that we would need to give them. Were working with our vendors. Some are still in the early stages. Were talking about can we use all this data? We will need systems to help us make use of it.
EnErgyBiz EnErgyBiz Theres constant change, new technology, new meters coming out. Do regulators understand that? hElM Once in a lifetime were actually being able to change that technology, we have the opportunity to do some things differently. We have our traditional customer information and financial systems. But now, were moving to more real time. And the business value is how to extract that information out of that. In the state of Texas, the regulators have really supported that transformation. They have been very much proponents of it. They really have embraced this change because they see the opportunities to advance the technologies and the opportunities that the consumers and third parties and others may have. burns The technology is changing so fast right now. The vendors have leveraged off each other to join various technologies in order to create much better systems.
How well are utilities embracing change? Establishing a smart grid vision is different for every company because every company has different drivers, different circumstances. Every company is different based on how aggressive theyve been about adopting different technologies. If youre in a state where the regulators do embrace change and are encouraging it, the pace is going to be very quick. Utilities are going to have to become good change managers. They have to become very good at change internal to the organization
EnErgyBiz Von dollEn
EnErgyBiz Are you expecting to see lots of plug-in electric vehicles? And how is that changing your business? hElM Oncor has quite an initiative now to support the plug-in vehicles. So as soon as the concepts and the business models around them are ready to go, we feel like well be ready to support that, whether its the dynamics of how we change our grid or how we operate it. But it is a challenge. sErnA We actually hope that there will be a lot of electric vehicles. We see that as a positive. We think it would support the policy of moving us out of using fossil fuels. But we dont think that the conditions are yet there for electric vehicles clayton burns, national grid beyond a niche set of customers. MEwhinnEy Were convinced we need to get our system ready, but its a journey thats going to take some time. These vehicles, if theyre charging even at a fast rate, theyre going to take a lot of charging at night, and thats going to overwhelm our transformer very quickly.
EnErgyBiz
So is there a fix for
that?
MEwhinnEy Weve always kept the lights on. Thats our business. So we will find a fix. And well have to do it very quickly. burns In the near term, a larger transformer is an immediate fix. Over a longer term, I think the issues may be reduced by the proliferation of solar on rooftops or community energy storage.
camilo serna, northeast utilities
18 E n E rgyb i z
look back eVen 10 years and you Wont recognize most
transforming the energy landscape by richard schlesinger
EnergyBiz Leadership Forum 2011

energybizforum.com learn more about energy game changers at our forum in Washington, Feb. 27 - march 1. Featured speakers will include leaders of bloom energy, nuscale power and solarcity and trans-elect referenced in this article.
of the technology we take for granted today; telephones and computers are just two obvious examples. Its difficult to recognize game changers when they first appear, precisely because they redefine the paradigms weve come to take for granted. But while the details may be murky, its clear that the energy sector will change in fundamental ways over the next decade, transformed by radical changes in the way we think of how power is generated, distributed and even financed as much as by technological innovation. NuScale Power, for instance, has a radical new approach to nuclear energy that has very little to do with technology per se. In fact, one of the attractions of its approach is that its reactors use familiar light-water technology that presents a familiar profile to regulators. Whats radical about NuScale is the size of its reactors and its modular approach. Rather than building a large, 1,400-megawatt plant costing several billion dollars, NuScale is designing small 45-megawatt reactors, largely developed at Oregon State University, and underground containment vessels small enough to be built in this country and shipped by rail. An end-user can start with a single reactor and scale up as needed. That completely changes the economics of nuclear energy. Although NuScales approach might seem intuitive, it was shocking just three years ago. It was accepted wisdom that the only way you could get economy of scale was to build big plants, says NuScales CEO, Paul Lorenzini. There wasnt a single vendor out there that was making a serious offer of a small plant. Now the NRC dedicates a branch to licensing small, light-water plants, and a project manager is assigned to NuScale. That a new startup company could even think about moving into a field like selling nuclear plants is revolutionary. But with familiar technology and lower capital outlay requirements, NuScale has set an aggressive target of 20182019 for a certified, operating plant. Lorenzini sees a number of markets for NuScale. They include mid-size utilities looking to add 200500 megawatts; large utilities that need to replace older, coal-fired plants; industrial customers that may be in locations not served by high-capacity grids; and foreign countries with modest grids that can add plants as small as 45 megawatts at a time. In another paradigm shift, distributed generation will have a profound effect on the industry over the next decade, driven by the aging grid and new, green sources of power. It was not until cell service and desktop computers were as cheap and reliable as the centralized models they replaced that they really caught on. Distributed generation
20 E n E rgyb i z
EnergybizMag.com
E n E rgy b i z
21
GAmE CHANGERS
must meet a third goal: it has to be clean. Although legacy distributed generation systems have met two of the three criteria, none has been able to meet all three. Diesel is cheap and reliable, but its dirty. Sunshine and wind are free but not always available. California-based Bloom Energy claims to have come up with a solution that will make distributed generation clean, cheap and reliable. Bloom has designed a self-contained device with a solid oxide fuel cell that takes in air on one side and fuel on the other to generate electricity without combustion and with very low to zero toxic emissions, depending on the fuel source. The cells run on a variety of fuels, including biofuels, bio- or landfill gasses and pipeline-delivered natural gas. Each Bloom Box generates 100 kilowatts, and the system is modular, so boxes can be combined to generate enough power for large plants. Five to 10 years out, the company plans to build smaller boxes, about the size of a home water heater, for individual households. K.R. Sridhar, Blooms founder and CEO, estimates the cost for such a unit could be as low as $3,000. At a price of $700,000 to $800,000 for a commercial unit, costs are between between 8 and 10 cents per kilowatthour over the life of the unit, according to Stu Aaron, vice president of marketing and product management. However, that figure assumes government subsidies. Lux Research, a research and advisory firm specializing in emerging technologies, estimates the cost without subsidies as between 13 and 14 cents per kilowatt-hour, with 9 cents for system cost and another 5 cents for fuel. But Aaron believes that as Bloom scales up, the fundamental low-cost materials will allow it to meet aggressive cost targets and deliver power at a competitive price without subsidies. Theres impressive testimony to Blooms optimism. Bloom was among the 26 companies named in the World Economic Forums list of 2010 tech pioneers, and it has attracted serious private investment. Bloom, which went public in February 2010, is actually a 10-year-old company, with an impressive base of customers, including Google, whose first installation was in 2008, Staples, eBay, Walmart, a repeat customer, FedEx, Safeway, Adobe and Coca Cola. Utilities are another market; Aaron says Bloom is partnering with Pacific Gas and Electric in a pilot project to provide 100 kilowatts to augment PG&Es grid in a four-block area in San Francisco. Financial innovations will be no less important than new technology in reshaping the power industry over the next decade. Thats particularly true for renewables, such as wind and solar. One of the chief obstacles to the deployment of solar, for instance, especially for small end-users, is the high up-front cost. A solar installation for a home can run from $20,000 to $50,000, and, depending on subsidies and the local cost of power, the payback period for a homeowner can be anywhere from seven to 20 years or more. SolarCity, a full-service solar provider, has developed a new approach that reduces that up-front cost to zero. The company essen22 E n E rgyb i z
tially rents the equipment to the homeowner, and includes installation and service for the life of the contract. Lyndon Rive, SolarCitys CEO, describes the company as an energy service company, a combination of financing, leasing and contracting, and the company has a hand in technology by partnering with others, such as Tesla Motors and the University of California, Berkeley, to develop a storage product to address the intermittent nature of solar. But the company is described as technology agnostic by Navin Chaddha, a managing director of the Mayfield Fund, the major venture capital firm that served as lead in a $25 million round of financing for SolarCity last summer. That makes it particularly attractive to investors at this stage, when theres so much innovation going on in solar without a clear indication of who or what the winner will be. Perhaps the greatest game changer of the 20th century was the interstate highway system. Robert Mitchell, CEO of TransElect, believes the transmission infrastructure Trans-Elect is proposing to link offshore wind farms is the 21st century equivalent. Trans-Elect intends to build a direct-current transmission line 2025 miles off the mid-Atlantic shore to connect offshore wind farms. Linking wind farms from northern New Jersey to the southern coast of Delaware, a 350-mile stretch, will help reduce the intermittent nature of wind; locating the turbines that far offshore addresses aesthetic issues and concerns about the danger turbines pose to migratory birds. When completed, this initial stage of the project will provide 6,000 megawatts, but there is potential for 64,000 megawatts off the mid-Atlantic. Whats revolutionary is that, at this point, the project is being funded privately, with the participation of Google and Good Energies, an investor in renewable energy, among others. PJM Interconnection, which manages the grid and the wholesale energy market in 13 eastern states and the District of Columbia, will assume control of the line. The payback for investors will be in the form of a flat rate of return, regulated by the Federal Energy Regulatory Commission. Whether some or all of these potential game changers bear the fruit they promise remains to be seen. But even in their early stages, they suggest the outlines of an entirely new energy paradigm.
Financial innovations will be no less important than new technology in reshaping the power industry over the next decade.
AN INTEGRATED SOLUTION FOR BES TRAINING & COMPLIANCE
coal takes a back seat

Huge $6 Billion Project Delayed
BY DARRELL DELAMAIDE
Illustration by Graham Fleming the decision in september by old dominion electric cooperatiVe to delay
its ambitious $6 billion Cypress Creek project threw the future of coal-fired electricity generation in the U.S. further into doubt. The cooperative, based in Richmond, Va., acknowledged that uncertainty about restrictions on carbon emissions played a role in the decision. But it claimed that the main reason for the delay was the sluggish economic recovery and slower-thanexpected growth in demand for electricity.
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Permit filing was to be delayed 18 to 24 months, so that the two-unit 1,500-megawatt station would now come on stream in 2018 at the earliest, and more likely 2020, instead of 2016, as originally planned when the project was announced in January 2008. This adjustment to our timeline does not in any way reflect a change in our goal of building the Cypress Creek Power Station to provide a reliable source of affordable electricity to meet the growing demand for energy, David Hudgins, the cooperatives communications director, said in September. But the delay came after a controversy extending from tiny Dendron, a town of 300 between Richmond and Norfolk where the plant is to be sited, across the nation about investing that kind of money in new coal-generation capacity when the future of carbon regulation and electricity demand is so uncertain. An April 2009 report on the Cypress Creek project by Synapse Energy Economics noted that more than 30 proposed coal-fired plants had been cancelled in the previous three years, and more than 40 others had been delayed. While some proposed plants had been approved, regulatory commissions in North Carolina, Florida, Virginia, Oklahoma, Washington, Oregon and Wisconsin had rejected proposals. ODECs consumer-members will be committed to
paying all of the costs associated with the proposed Cypress Creek Power Station for at least 45 years, report authors David Schlissel and Lucy Johnston wrote. The cooperative had not demonstrated, even before a sluggish economy forced them to scale back anticipated demand, that the 1,500 megawatts in new capacity would be needed before 2030, Synapse said. The cooperative rejected the claims in the Synapse report as speculative and inaccurate, noting that Cambridge, Mass.-based Synapse catered almost exclusively to renewable energy organizations. But report author Schlissel, who now operates as an independent consultant, said the delay in the Cypress Creek project follows a pattern of many coal-fired projects that have been canceled in recent years. First they delay for a year or two, then they extend the delay and then finally they die, he said. Schlissel is currently working on an update of the Cypress Creek report for local environmental groups. I dont think anybody will build new coal-fired plants for a long time, he said. The economic risks are too great and there are cheaper alternatives. These include natural gas, combined cycle, and renewable energy plants, Schlissel said. Virginia, for instance, has offshore wind capacity that could meet increased demand in the cooperatives service area.
COAL TAKES A BACK SEAT
Its 11 member cooperatives serve more than 1 million customers in Virginia, Maryland and Delaware. As the drama in Dendron, where the cooperative has already spent $25 million on property and associated costs, plays out, the prospects for coal nationwide continue to dim. In a new report, Houston-based Wood Mackenzie analyst Hind Farag predicted that as much as 60 gigawatts of coal-fired capacity will be forced into retirement in the next 10 years, compared with 30 gigawatts of capacity closed in the past decade, representing mostly old steam and oil-fired plants. A number of leading utilities, including Duke Energy, American Electric Power, Xcel Energy and several others, have announced plans to retire thousands of megawatts of coal capacity over the next five or six years. These announcements highlight the end of a tumultuous decade for coal-fired generation and are a harbinger of even tougher times ahead, Farag wrote in her September report. Even aside from any comprehensive cap-and-trade legislation, which is likely to be put on a political back burner, carbon emission and other restrictions planned by the Environmental Protection Agency and other regulators will drive utilities to retire coal capacity, Farag said. Anticipated U.S. Environmental Protection Agency rules for further regulating noncarbon emissions would require installing expensive emissions controls on generators not yet retrofitted, Farag wrote, or incurring extremely high sulfur dioxide and nitrogen oxide emission allowance costs. Other noncarbon regulations that will have significant impact on the coal-fired fleet are the Clean Air Transport Rule, Mercury Maximum Achievable Control Technology standard, Hazardous Air Pollutants standards and a new rule under the Clean Water Act. New coal-fired plants face the same environmental restrictions, but its also just a question of basic economics, Farag said. Its hard to justify investment in a new coalfired plant when construction is three to four times what it costs for a natural gas-combined cycle plant, she said in an interview. Cheap shale gas is also approaching coal in price and even in quantity with much lower emissions, she noted. The Wood Mackenzie report goes on to note that the momentum for greenhouse gas control is such that some form of federal carbon legislation will be passed in the next few years, adding to costs then and creating further uncertainty now. Nor is the much-ballyhooed clean coal from carbon capture and storage likely to save the day for coal plants. The earliest any technology will be available for wide-scale implementation, Schlissel estimates, is 2020 or 2025. In
26 E n E rgyb i z
2025, 83 percent of the coal-fired plants in the United States will be 45 years or older and its unlikely anyone will spend hundreds of millions of dollars outfitting these plants with carbon capture and storage technology, he said. Even if new coal-fired plants were to be built then, the CCS technology would be expensive and add costs that might make coal uncompetitive with alternate fuels. Moreover, CCS would probably be possible only in some instances, not all.
the jury is still out on CCs, but the cards are stacked against it.
The jury is still out on CCS, but the cards are stacked against it, said Richard Morse, director of research on coal and carbon markets at Stanford Universitys Program on Energy and Sustainable Development. Neither of the two countries most likely to implement CCS the United States and China have proper incentives in place, Morse said. The economic stimulus program and the House bill for cap and trade were the only sources for the government subsidies that would make CCS development possible. Stimulus money is mostly gone and capand-trade legislation will die in a Republican-dominated Congress. In China, Morse said, research and development on CCS will continue but it will not be implemented there because power costs are already too high. CCS would double the cost of building power plants and require 30 percent more coal to operate neither of which is in Chinas interests. So, despite recent claims in the popular press to the contrary, this expert on international coal said China will not be the savior in clean coal technology. In the meantime, unused capacity in existing natural gas plants remains high, Schlissel said, with a weighted average of 41.2 percent in 2009. Tapping into this capacity and building more wind and solar capacity is the way the power market will pick up the slack on coal-fired generation, he said.
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an energy roadmap
200 Nuclear Plants by 2050 By Devin Nunes
F
28
or more than halF a century, the united states has
had access to abundant, reliable and affordable energy needed for America to create the largest and most dynamic economy in the world. However, our great legacy and the promise of future achievements cannot be taken for granted. With half of our annual trade deficit related to energy and 70 percent of our oil coming from foreign sources, we have become dangerously dependent on unstable foreign governments. This tenuous situation must end and it is time for Congress to enact major reforms. Throughout modern history, national energy consumpE n E rgyb i z
tion and economic prosperity have been closely correlated. Strong and healthy economies consume vast amounts of energy, which in turn are used to increase knowledge, productivity and quality of life. In contrast, policymakers have a clear view of what to expect if energy abundance is not made a top priority. Poverty and economic duress are universal characteristics of nations without affordable energy. A nighttime satellite image of North Korea in total darkness serves as a powerful example of this fact. This unique perspective on North Korean poverty from space is sharply contrasted with the
shining prosperity visible in South Korea as well as other oil with domestic oil. In fact, in my legislation I have proposed unprecedented investments in new forms of energy the energy-rich nations. To provide America with the energy it needs to thrive, largest investment in renewable energy in world history. At the same time, the roadmap recognizes that past investCongress must first acknowledge certain facts about current energy sources. According to the Energy Information ments in renewables have failed to provide meaningful choice Agency, oil, gas and coal continue to be the overwhelmingly or affordable energy alternatives. This is largely because federal dominant source of energy for the people of the United funding for renewable and conventional energy alternatives States and the world. Without these sources of energy, have traditionally been provided to the most influential and well-connected special interests. I propose ending this cronyism America would simply not function. Motorists in the United States consume nearly 485 million by implementing a reverse auction that is blind to technology gallons of gasoline per day. As a whole, fossil fuels account for and immune from the influence of lobbyists or activists. To receive federal support from the new trust fund, an 84 percent of the energy we consume. The next most significant source of energy is nuclear power, which constitutes energy producer would simply bid the minimum amount about 7 percent. Policymakers have largely ignored these of federal assistance needed to create 1 megawatt of renewable electricity. The lowest bid will receive energy facts of life. federal support. For more than 30 years, and since the The roadmap debunks the notion that presidency of Jimmy Carter, U.S. energy EnergyBiz expensive energy is the only way to spur policy has largely existed outside the realm Leadership alternatives and rejects the myth that of reality. Rationing, whether through fuel Forum 2011 Americans can live without oil and gas efficiency standards or other rules imposed energybizforum.com in the near future. Furthermore, the plan on manufacturers, has been used as a crutch learn more about recognizes the importance and enormous in place of developing meaningful sources emerging republican potential of nuclear power. of energy. At the same time, politicians have energy policies at our forum in Washington, It is beyond dispute that nuclear power is made fanciful predictions about the capacity Feb. 27 - march 1, where the most effective way to reduce our nations of renewable energy to replace fossil fuels, rep. devin nunes will be overall fossil fuel consumption in the coming particularly when it comes to affordability. a featured speaker. decades. While additional investments in President Carters 1977 prediction, for technologies and alternatives are needed, example, that 20 percent of our energy would be sourced from solar panels by the year 2000, is 10 years particularly to accommodate our transportation needs, Amerioverdue. In fact, less than one percent of our energy comes from cas electrical demand can largely be met with the construction solar today. Overall, the pace of energy innovation has been of 200 new reactors by 2050. The roadmap not only mandates painstakingly slow despite tens of billions of dollars in direct the siting of these reactors, but it also paves the way for regulasubsidies, tax breaks and government-sponsored research. The tory approval by streamlining the process. The attractiveness of nuclear energy is greatly enhanced American taxpayer deserves better. It is time for our nations energy policy to be grounded in reality, a goal I have achieved by the roadmaps waste recycling provision. Since nuclear fuel retains 96 percent of its energy, fuel recycling will in my new legislation. The Roadmap for Americas Energy Future recognizes that greatly increase efficiency. Additionally, it will mean that many options are available to secure our long-term energy only 4 percent of the fuel will end up in long-term storage. Nuclear waste recycling isnt a new concept. It is already security. The bill leverages these alternatives to produce a diverse energy portfolio that would offer much greater being done safely and securely around the world. France, one of the most environmentally conscious nations on Earth, uses stability in the long run, as well as more affordable prices. The Energy Roadmap begins by securing sufficient recycling to power reactors that provide 78 percent of the domestic fossil fuels for the coming decades, expanding oil nations electricity. Their waste stream is stored in a building production in the far reaches of northern Alaska, off our no larger than the size of a typical high school gymnasium. The reforms contained in the roadmap present Congress shores, and in the lower 48 through oil shale deposits. Additional access to federal land and new conventional with an opportunity to build a bridge to our nations energy energy leases will not only add reliability to our supply chain, future without sacrificing our national prosperity. The plan helping to keep prices low, but will raise billions of dollars in will create real, high-paying jobs, and is certain to reduce lease and royalty revenues. These dollars will be dedicated to carbon emissions more than any proposal before Congress to a trust fund that will be used to secure the long-term energy date. If enacted, the Energy Roadmap would fund the most needs of our country through the deployment of affordable aggressive effort to deploy renewable energy in history. renewable and alternative energy options. Rep. Devin Nunes (R-Calif.) has developed an Energy RoadThe roadmap is much more than an effort to replace foreign map meant to guide national energy policy.
T&D for a New Era
a highway for the 21st century

Tres Amigas Plans to Transform the Grid
BY PAUL KORzENIOWSKI
electricity, and it is being designed to scale up to 30 gigawatts. rural, small town. With a population of 32,667, the To support the project, the company plans to deploy three highcity is home to peanut and cotton farms, and ranches focused voltage direct-current terminals. Each will have 5 gigawatts of on meat and dairy production. Yet despite its outward capacity and be stationed about two miles apart in a triangleappearance, this small, sleepy community may soon become shaped loop. Once completed, the interconnect has the an energy industry epicenter, one linking the nations auton- potential to change how energy is distributed, breaking down omous energy grids and creating a paradigm shift in how many of the traditional barriers, so suppliers can ship energy across the country rather than being limited to immediate energy is produced and distributed in the United States. Tres Amigas is the company behind this potential trans- areas. Construction of the lines is expected to begin in the fall formation. The company signed a 99-year lease with the and the interconnect is slated to be fully operational in 2014. An endeavor of this size and scope has never been understate of New Mexico and plans to develop 22 square miles of land, or about 14,400 acres, into an energy superstation. The taken: converter links generally limited to hundreds of startup wants to build a three-way AC/DC interconnection megawatts exchanged at distances of hundreds of yards rather that would link the Eastern Interconnection, the Electric than miles. Because of the Tres Amigas projects size and Reliability Council of Texas and the Western Electricity scope, there is significant risk involved in trying to get all of Coordinating Council. In plans viewed as bold or even the different technology elements to work together, said Jay brash, the station will rely on cutting-edge technology to Holman, research manager with IDC Energy Insights. The company is working with American Superconductor, which move energy from grid to grid. has invested $1.8 million for a minority But the project faces a number of potential stake in Tres Amigas, to build the supercontechnical, business and political hurdles. EnergyBiz ductors. The underlying technology is nascent and Leadership In addition, the bulk of the megawatts has never been used at the scale that Tres Forum 2011 entering the superstation are expected to be Amigas has proposed. Estimates are that generated from renewable energy sources it would take $500 million to $1 billion in energybizforum.com whose production can fluctuate dramatically. capital to meet the projects goals, and where learn more about the So the energy interconnect must be able to the money will come from and how viable revolutionary tres amigas project at our handle numerous charge-discharge cycles. the firms business model is are both unclear. forum in Washington, Tres Amigas plans to use batteries to provide Last, established energy producers, local Feb. 27 march 1, short-term energy storage and to keep the governments and federal regulators could where phillip harris, the chief executive officer system balanced. block or even unhinge the project on a whim. of tres amigas, will be a The colossal plan comes from a miniscule So while Tres Amigass plans have great featured speaker. management team. In fact, Tres Amigas is an potential, there are also significant doubts appropriate name for the company because it about whether or not they will make their literally has only three full-time employees. way from blueprints to thriving business. There are now nine U.S. connections among the three grids. Their efforts are being complemented by a virtual team of a few Seven link the Eastern Interconnection and WECC grids and dozen specialists who have taken on various engineering and two connect ERCOT to the Eastern Interconnection. No marketing tasks. To realize its vision, the startup will need from interconnection exists between ERCOT and WECC. Most $500 million to $1 billion. Where that money will come from of the converter links carry 100200 megawatts of electricity is unclear as the company has been mute about its financing to although the largest supports 600 megawatts of power. The date as well as its future plans. The developers of the fledgling energy superstation do total capacity of the nine connections is about 2 gigawatts. Initially, Tres Amigas plans to carry up to 5 gigawatts of envision generating revenue in a couple of ways. We will be
Founded in 1909, cloVis, n.m., seems like a typical,
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a toll taker and charge every company that sends or receives energy over our network, said David Stidham, Tres Amigass chief operating officer. In addition, the company plans to offer storage capabilities to its customers and service features designed to enhance grid reliability and power quality. The viability of the business plan revolves around other companies willingness to buy and sell energy in broader geographic regions. Certainly, the renewable energy companies are interested in Tres Amigas, said Michael Giberson a research associate at the Center for Energy Commerce at Texas Tech University. They have been hamstrung and largely unable to move power out of their immediate area. Established energy companies may not be as willing to endorse the model. We have seen push back from the fossil fuel suppliers who think that more use of renewable energy means less use of their services, admitted Tres Amigass Stidham. These companies have some powerful allies. In the spring, governors of 10 states including New York, New Jersey, Massachusetts, and Virginia sent a letter to congressional leaders questioning the idea of the new transmission superhighway. Instead, they urged Congress to support their own regional energy solutions. There has also been resistance from the Texas Public Utility Commission. The Texas PUC fears that energy flowing out of the state could increase costs for local consumers, said Texas Tech Universitys Giberson. Tres Amigass Stidham said the company is willing to move ahead linking two rather than three grids if Texas balks at the connections. To date, Tres Amigas has circumvented potential regulatory barriers. In March, the Federal Energy Regulatory Commission granted Tres Amigass request for authorization to sell transmission services at negotiated rates on its proposed supertransmission station. But the company will have to clear many regulatory and business hurdles before its transmission lines are built and energy starts to flow over them. In the meantime, the sun beats down and the dust blows over Cloviss open fields and questions abound about the areas and the nations energy future.
INDUSTRY EXECUTIVES | POLICY MAKERS | REGULATORS | CUSTOMERS | CONSULTA
The 3rd annual
The One Energy Industry Event

Meet the decision makers Hear from the thought leaders And participate in the discussion on the winning strategies you will need as an energy company over the next ve years!
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An Insightful, Informative Agenda Featuring Four Critical Perspectives:
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The Generators Political and social issues are putting an unprecedented array of challenges on the existing power eet. Where will new capacity come from? Where should generators be investing over the next ve years and how do plant operators prepare for a dramatic shift in federal and state policies? How is the engineering community helping them respond? Strategizing for Success How do energy and utility executives make intelligent strategy decisions and future-proof technology investments in a ve-year scenario plagued by uncertainty? What are the critical technology, economics, regulatory, and political issues that will impact energy utilities over the over the next ve years? In this session senior executives from the worlds leading energy business consulting organizations will discuss the game changers in technology, regulation, economics, and politics that will aect our business over the next ve years and what should we be doing in the near-term to mitigate risk and maximize opportunity. The Deliverers Smart Grid 21st Century Transmission will they all be evolutionary
or transformational? Over the next ve years, will they allow old businesses to modify their current approaches and continue to thrive, or will they mean an entirely new ecosystem of players with novel business ideas and solutions is about to descend on Americas energy consumers?
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Bringing Wisdom to the Debate - Getting the Rules Right

Legendary industry CEOs, award-winning CTOs, national journalists and executive directors of the nations leading energy associations and agencies discuss the challenges facing the Energy/Utility industry over the next ve years, new policy development, the increasing empowerment of technology, and the industry and government policies needed to bring this sector into a new era.
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INDUSTRY EXECUTIVES | POLICY MAKERS | REGULATORS | CUSTOMERS | CONSULTA
ANTS | FINANCIERS | LEGAL FIRMS | BUSINESS LEADERS | ACADEMIA | INVESTORS
FEBRUARY 27 MARCH 1, 2011, WASHINGTON, DC
ENERGY GAME CHANGERS

Winning Strategies for the Next Five Years
Gain expert insight into the technologies, economics, and politics that will signi cantly impact the power industry over the next ve years!
Nicholas Donofrio,
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Dan Arvizu, PhD,
Director & Chief Executive, U.S. Department of Energys (DOE) National Renewable Energy Laboratory (NREL)
KR Sridhar, PhD,
Principal Co-founder & CEO, Bloom Energy
Julia Hamm,
CEO & President, Solar Electric Power Association
Phillip G. Harris,
CEO, Tres Amigas
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If you have P&L, strategic planning, marketing, or executive management responsibility at a utility, producer, marketer, or technology company that serves the Energy/Utility industry, you absolutely want to attend this event!
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Speakers will put the next ve years into perspective by answering questions involving:
Energy Industry Game Changers; when and how they will aect your business. How Energy/Utility executives make intelligent strategy decisions and future-proof technology investments in a ve-year scenario plagued by uncertainty. Technologies, economics, regulations, and politics that will change your business.
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new approaches to solar deployments

SUBSIDIES KICK IN // By BILL OPALKA
solar proJects in the desert southWest, especially
those on public lands, seemed to fall into a black hole. Interminable reviews and a policy vacuum seemed to conspire to prevent any large-scale projects from being built for nearly two decades. But the imperatives of the economic stimulus plan and Californias push for even more renewable energy seemed to change that dynamic in the past two years. The coordination of state and federal reviews was but one piece. A policy nudge more like a kick came in the form of cash grants to renewable energy projects that the American
Recovery and Reinvestment Act started to aid developers unable to obtain financing in their usual manner. Those circumstances led to the approval of eight large projects in the desert Southwest in a two-month span by midNovember. The projects in California, Arizona and Nevada, seven concentrating solar power plants and one photovoltaic, would add 3,500 megawatts to western power grids. But rewind to early 2009. Ken Salazar, secretary of the Department of Interior, made renewable energy development on federal lands a priority. The Bureau of Land Management is the departments custodian of public lands, to which President Barack Obama gave an accelerated mandate to have sited 9,000 megawatts of renewable energy by the end of 2011. In six southwestern states the BLM has identified
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23 million acres for solar potential, 20.6 million acres for wind and 111 million acres for geothermal. Theres been a significant shift to renewable energy, especially in the last two years, said Ray Brady, the team lead for the BLMs minerals and realty directorate since 2005. Various renewable energy developers, along with state and federal officials, have fast-tracked 34 projects on BLM land 14 solar, seven wind, six geothermal and seven for transmission for which the administration wants complete reviews by the end of 2011. The federal government has relied on the memorandum of understanding between the various federal agencies, essentially a streamlining of the review among the cabinet-level departments such as Energy and Interior, their units such as the BLM and the U.S. Fish and Wildlife Service, and their state counterparts, along with the Federal Energy Regulatory Commission and other state agencies. The agreement expedited projects that were on track to break ground by the end of last year and become eligible for more than $15 billion in funding from the cash grants program. Nowhere is this more obvious than in California. With all the renewable energy projects encouraged by the economic stimulus or by state efforts, an estimated 70 gigawatts of new generation are proposed in that state alone. One early example off the expedited process might be BrightSource Energys Ivanpah project in the Mojave Desert, which has three sections that would total 392 megawatts of power. Early last year, the developers for the Ivanpah project responded to environmental objections over sensitive plant locations made during the permitting processs public comment period. BrightSource created an alternative design that reduced the footprint of the third Ivanpah plant by 23 percent, avoiding the area identified by environmental groups during the public comment period. The overall footprint of Ivanpah was cut by about 12 percent, and generation capacity was reduced by 48 megawatts. The speed with which the plans were modified is a
WERE WIRED TO DO IT ALL
WE DELIVER. CONCEPTION TO COMPLETION. POWERENG.COM
success of the review process, BLMs Brady said. An approach that hasnt had quite as much success is the two federal loan programs in the stimulus. Only one guarantee for $1.37 billion has been awarded. It went to BrightSources Ivanpah project, which broke ground in the fall. Developers have claimed that the approval process is unwieldy, and the $6 billion program has been raided twice by Congress to pay for other priorities. Rhone Resch, president and CEO of the Solar Energy Industries Association, remains hopeful. Now that the program has been in place for a couple of years and were working our way through some of the bugs with respect to the reviews and approvals, we can streamline it and really
get more projects out the door and commence construction, he said. If it survives. The midterm election could mean many things for energy legislation, but large, stimulus-style spending to jump-start solar projects does not appear to be imminent. There are going to be very few chances for new appropriations, if any, said Alexander Kragie, vice president of the Coalition for Green Capital, in the wake of the Congressional midterm election that swept aside much of Obamas clean energy agenda. That means solar and other renewable resources will need even more new approaches.
hawaiis solar challenge

Big Renewable Integration Under Way // By Jay Ignacio
on haWaii island, the largest in the aloha state, We
have a unique story in the world of electric generation, a story I believe will become valuable to many across the country. Our utility, Hawaii Electric Light, is leading the way to a clean energy future. Over 30 percent of the electricity we provide comes from renewable resources. We use a broad mix of clean energy sources, including geothermal power, wind power, run-of-the-river hydro, and numerous gridconnected customer-sited photovoltaic systems. We expect nearly 40 percent from renewable resources by the end of next year. PV systems are becoming increasingly popular. Hawaii Island now has approximately 750 PV arrays with a total maximum generating capacity of about 11 megawatts, compared with our average day peak of 160 megawatts. Many of these systems make use of net energy metering. A newly approved feed-in tariff will also be available soon to customers with PV. We consider managing this diverse mix of technologies one of our greatest successes. I am proud of everyone who works for our company, but I have a special regard for system operators who daily manage a unique combination of firm conventional generation, firm renewable generation, intermittent utility-scale renewables and a growing level of distributed generation. When we talk to specialists around the world about integrating more renewable energy onto grids, they defer to our system operators as the true handson experts. To help us integrate all these sources of energy, we currently require an interconnection study when distributed
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generation of any kind reaches 15 percent of the peak load on a specific circuit as in California before additional DG can be added. This trigger is designed to protect the reliability of service to all our customers. Moving forward we are working to accommodate more renewable energy, including distributed photovoltaic. The Hawaiian Electric companies are engaged with PV vendors, state and federal agencies, and others in a reliability standards working group. The group will attempt to analyze, in greater detail than ever before, the physical effects that solar, wind, and other variable generation sources have on our grid, and to develop ways to mitigate and control adverse impacts so that more renewable energy can be reliably integrated into the system. We are also trying to improve wind prediction techniques so that with clearer Jay ignacio notice of changes in wind farm output, we can better manage other forms of renewable energy on the grid. Why is all of this so important? Hawaii, composed of seven major islands, is the most oil-dependent state in the nation. Approximately 95 percent of all energy for transportation and electricity is dependent on imported petroleum. Every island grid stands alone, with no interconnections to one another, much less to the U.S. mainland. Heavy dependence on imported oil poses energy security, economic and environmental challenges to our state. The Hawaii Electric subsidiary companies, including Hawaii Electric Light, are committed to meeting our states aggres-
sive goals, which call for 40 percent of electricity coming from clean sources. We know there is still much work to be done, so we are pursuing potential engineering solutions, including better grid surveillance, advanced load controls, and energy storage systems. The Hawaiian Electric companies are engaged in a number of smart grid studies to find ways to integrate more DG on our grids. The Department of Energy and the different national laboratories are spending significant time and energy here. There are a number of initiatives getting
started and they hold great promise. Eventually, a top-to-bottom smart grid should help us increase renewable energy on our grids. The deployment of an advanced smart grid will be neither quick nor cheap: the 20-year timeframe of 20102030 for our states clean energy goals recognizes the difficulty of this and related energy challenges. In the meantime, we have to depend on our smart people. Fortunately, along with geothermal, wind and sun, we have an abundant supply of those as well.
Jay Ignacio is president of Hawaii Electric Light.
solar as commodity
The Value of Price and Convenience // By Ed Regan
there are at le ast three trends emerging in
renewable energy markets that are good for consumers but may be bad for some solar businesses. Its all related to the three big consumer questions: price, convenience, and compared to what? These are lessons Ive learned from utilityscale energy supply planning, and from having participated in the Solar Electric Power Associations fact-finding missions to Germany and Japan. I work for Gainesville Regional Utilities, and our energy supply plan includes a European-style solar feed-in tariff. Under this program a certified statement of system cost per installed watt must be submitted before any payment is made. We instituted this for the purpose of setting tariff rates on a going forward basis The variation in cost per installed watt has been huge. We have examined the data and looked for correlations with size and any other factor we could imagine. Guess what we found? The business model employed by the solar contractor makes more of a difference than any other factor. Vertically integrated solar companies just do not come even close to being price leaders. Instead, this award goes to ruthless designers with little or no product loyalty who are very creative in drawing from existing trades like roofers and electricians on a competitive subcontract basis. They also are good at sales and financial analysis, even to the extent of providing bridge and equity loans. The traditionalists in our market are loud in their disdain for this approach, and promote solar design and installation as almost an art claiming huge advantages in their skill in string layout, wire sizing, availability for trouble calls, the virtues of their particular product line and so on. At the end of the day, as much as a 30 percent difference in cost per predicted kilowatt-hour and an easy path to affordability seems to be taking the field. The traditional view is that of solar as a specialized form of power plant design, with site-specific worries related to
matching impedances, wire sizing, inverter optimization, racking design, wind loading and the rest. Solar is not something you just buy and plug in. But why not? Why cant solar be just like any other appliance? Why cant it be like a refrigerator or a clothes washer? This opportunity for the commoditization of solar energy has been noticed by some really big players in the consumer appliance world. Their innovations will be significant game changers that I expect will lead to considerable consolidation and market squeeze in the solar industry. For the first time at this years Solar Power International Conference and Expo in Los Angeles, I saw major appliance manufacturers and solar companies stepping up to this vision. New concepts in design and manufacture have made solar modules into standardized, plug-and-play appliances. How so? Frames that are not only structural but provide grounding. Simple, almost elegant self-sealing mounting brackets that anticipate every step of the installation. On-board inverters, wiring that the installer never touches and, of course, excellent photoactive properties. Just think no racks, no inverters, wind load compliance as simple as picking the number of mounting brackets per module. Another emerging trend is solar compared to what? The never-ending arguments related to solar or wind or biomass carve outs in the context of renewable portfolio standards may be getting worse. Were all used to looking at those famous average wind speed maps leading to the conclusion that there are parts of the country, such as Florida, where wind will never be feasible. But compared to what? As the grid capacity for wind is becoming saturated in the high wind areas, developers are looking further afield, and guess what? In areas where wind is traditionally thought of as not being feasible, de-rated turbines may be able to beat solar in terms of cost per kilowatt-hour.
Ed Regan is assistant general manager for strategic planning at Gainesville Regional Utilities.
ITRON: Solutions rooted in reality

North American utilities are being buffeted by the winds of change, yet charting a course to reach a moving destination known as smart grid requires pragmatic, flexible solutions.
This is true across the world as well, though the global challenge is considerably broader. Flexible solutions might simply involve the fundamental act of bringing electricity to users in developing countries, automation for a European utility or a smart grid solution with business analytics for a cutting-edge utility in California or Texas. Itron is involved at all of these levels across the globe. In fact, the challenges faced by utilities worldwide require a deep understanding of local culture, technology use cases and regulatory regimes, along with respect for every utilitys unique business needs. To help its customers meet their sometimes disparate challenges, Itron devotes enormous resources to research and development and to its ecosystem of partners. We believe that a sustainable approach to meeting our customers needs creates the most value for our customers and contributes to our mutual goals of efficient stewardship of the natural resources we collectively manage. Itron CEO and President Malcolm Unsworth articulated these themes recently when he addressed an audience nearly 1,000 strong at the companys 29th annual Users Conference.
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The way we manage energy and water will shape our century, Unsworth said. Utilities need flexible solutions, rooted in reality. They need new thinking, new tools, in order to provide effective, efficient management of the worlds resources. As a growing company with an unmatched breadth of solutions and partnerships, Itron is well positioned to deliver that thinking and the tools to achieve it. We are a truly global company operating locally, Unsworth added. We do business in 130 countries with 8,000 customers speaking 27 languages. We offer solutions rooted in reality.
North American nuances

Utilities across North America, whether in the power sector, natural gas or water industries, need solutions rooted in reality as they face enormous challenges. As siting new power plants becomes difficult and with restrictions on traditional fuels such as coal, operational efficiencies and engagement with customers will enable utilities to do more with less. Still, the litany of challenges is daunting.
thought lE AdErshiP sPonsorEd by itron
Customer engagement is part art, part science, and early stumbles on smart meter deployments in some regions of the United States have produced public pushback and regulatory wariness. Mandates for the increased use of utility-scale renewable energy, as well as the growth in distributed generation, present major engineering challenges. The introduction of electric vehicles into the market requires tracking and
monitoring for impacts on load and distribution infrastructure. Dynamic pricing programs that shape load require metering and backend solutions as well as public outreach and education. Uncertain economic conditions demand efficient use of capital and operating budgets. How is Itron responding to these utility needs? Were sensitive to the nuances of local markets, including their varied regulatory requirements
and relationships. We are leading the investment in technology solutions and data management strategies. We are pursuing partnerships that vastly increase our capabilities across the distribution system. We hold frank discussions with customers about their challenges. We understand that our mutual bottom lines depend on delivering business value. There is a great deal of diversity to the North American market, said Philip Mezey, senior vice president and chief operating officer for Itron North America. We sometimes make the mistake of talking about this continent as if its a homogenous entity. The business drivers vary across this market, so we need to be sensitive to the many nuances here. Market-leading utilities in California, Texas and Ontario have responded, respectively, to limits on new fossil-fuel generation, deregulation and the retirement of coal-burning power plants. In markets where smart meters are not required or sought, regulatory acceptance varies and Itron offers solutions for local needs. Were in the position of offering a range of technologies at different price
thought lEAdErshiP sPonsorEd by itron
points, Mezey said. Many of our customers are perfectly happy using a handheld device to read meters and are getting the business results they need out of that approach. Our attitude is to let the market mature and work with our customers so they understand the value were generating with the customer base thats using the new technology. Were aware of and supportive of our customers relationships with state regulators, Mezey added. Were very respectful of that relationship.
The value of sustainability

Just as wise stewardship of our natural resources is the hallmark of the modern utility industry, so Itron believes that a sustainable business approach yields the most value in the long run. As an established public company, we think this is an opportunity to build a sustainable business over time, Mezey said. Its healthy to have the market develop over a decade or two, to deliver positive business results and make sure the smart grid works. We think the best thing we can do for the market is to deliver real value, he continued. In order to deliver that value, it takes software and services to meet the business cases that our customers are presenting to their regulators. So we feel we need to participate more broadly than just delivering a product. Our approach is to push for open standards that unlock innovation. In the near term, partnerships with companies offering complementary technology and services allow Itron to bring an unprecedented breadth of solutions to its disparate customer base. We have over 100 partners participating in a large ecosystem, Mezey said. Thats exciting, because theyre out there innovating on top of our system. We think that by driving that forward well derive benefits from
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the virtuous cycle of software and services that drives value. We need to keep it open to the marketplace for new and different ideas. The strategic alliance weve just announced with Cisco, for instance, gives us an opportunity to embrace what theyve learned from other industries, Mezey said. In September 2010, Itron announced a strategic alliance between Itron and Cisco to deliver collaborative solutions to transition smart metering technology into an open and interoperable, enterprise-class network for utilities. Specifically, the two companies will develop a secure, standardsbased platform for IPv6 implementation of field area communications in support of smart meters, distribution automation and interfaces to the customers premise. Itron will license and embed Cisco IP technology in its OpenWay meters and offer Cisco networking equipment and software with its AMI deployments. In April 2009, Itron announced a partnership with Teradata, a global leader in business analytics, data management and warehousing. This deal extends the value of our offerings by resolving the oft-cited observation drowning in data, starving for knowledge. Together, Itron and Teradata are introducing a new concept to the market called Active Smart Grid Analytics. Active Smart Grid Analytics is a complete data management platform to deliver business intelligence value from the smart grid. Active Smart Grid Analytics (ASA) will apply advanced analytics to data from meter data management systems and advanced metering infrastructure, as well as customer, financial and operational information to enable smarter, faster decision-making.
Lowering total cost of ownership

While maximizing the business value of our offerings to our customers is the fundamental driver behind these partnerships, an underlying, complementary goal is to lower the total cost of ownership. Frankly, smart grid costs too much, Mezey said. If every utility has to build a lab to prove out the technologies and experiment with them and acquire new skills and
build out network operation centers and do industrial-strength security for millions of endpoints and meet all the challenges and seize the opportunities that smart grid offers, the cost will be too high. If you look at the rate cases being filed, all parties are concerned about the costs, Mezey continued. That money goes toward development, integration and proving systems through testing and deployment. There are one-time capital costs and the recurring costs of operating and maintaining a complex system over its life cycle. If we dont address that as an industry, this is going to be a short ride. Part of what were doing with the Cisco relationship, for instance, is trying to standardize as many components as
thought lE AdErshiP sPonsorEd by itron
we can, harmonize the technologies and drive down costs. The utility industry has been plagued by islands of automation, which raise total cost of ownership, Mezey said. We need to materially address that with a platform that allows us to integrate many different products from different suppliers. We need to speed up the time-to-value for our customers and reduce total cost of ownership. Itron invites you to visit our Web site and read about our partnerships through our own press releases as well as business and industry media articles under Itron in the News to learn more.
utes to achieving national priorities. As citizens we have an interest in promoting energy efficiency, Mezey said. We are believers, as a company, that its easier to save energy than it is to generate it. Were not eco-crazy, were soundly focused on the business of delivering customer value. Yet we do have a point of view and we do believe that the work were doing in the energy space can have an influence on national security. Reducing waste or inefficiencies in the transmission and distribution network should be considered a renewable resource.
Itrons corporate culture: walking the talk

In an era when the notion of corporate culture is often cited due to its absence, Itron proudly does its manufacturing domestically for the North American market and believes that its solutions rooted in reality contribute to the greater good. Unlike a number of our competitors, we operate our own factories and build the products we sell right here in North America, Mezey said. We are focused on and committed to the electricity, natural gas and water markets here. To succeed at high-volume manufacturing requires discipline. And to effectively compete against products developed and manufactured offshore requires ferocious focus. Mezey credits the dedication of Itrons people for achieving that discipline and focus. To travel among our facilities and look people in the eye and understand the impacts were having on communities providing quality jobs is actually very inspirational for me. I have tremendous people working for me, from product development and manufacturing to sales, marketing and project delivery. Just as Itrons business strategy dovetails with our customers needs, we believe that our success contrib-
Pushing innovation across utility sectors

We are really excited about taking the concepts developed in the electricity sector and applying them to the natural gas space, Mezey said. Obviously, some of our largest utilities are integrated gas and electric utilities. We think there are tremendous opportunities there in operational efficiency and conservation, as well as safety. We see these opportunities extending into the water space as well. Meanwhile, North America often serves as a proof point for utilities around the world anxious to see how Itron and its partners and customers are tackling utility issues that resonate globally. Interestingly, Mezey concluded, our customers are visited frequently by a wide range of global utilities, which are very interested in whats going on in North America. That provides a good exchange of ideas.
The global perspective

Citing forecasts that project a 40 percent increase in global energy demand by 2030, Malcolm Unsworth emphasized that such demands underscore Itrons aggressive investments in research and development alone, and with partners. Future challenges, once ephem-
eral, now loom as tangible requirements for utilities, Itrons president and CEO said. It took a century to perfect the filling station for internal combustion engines, yet were expecting 50 million electric vehicles on the road within 20 years, Unsworth said. Utilities face a huge challenge to make EV charging a convenient necessity. In the natural gas sector, mere modernization of the distribution network poses an enormous task, not to mention bringing new, smarter meters to that industry. Utilities must upgrade an enormous inventory of aging infrastructure for safety and reliability, Unsworth noted. In the United States alone, there are more than two million miles of natural gas pipelines and 60 percent of that inventory is 40 years old. Water utilities face an analogous challenge. Across the globe, a centuryold distribution system is leaking, wasting a precious resource and hurting utilities bottom lines through the loss of non-revenue water. Itron systems will enable utilities to find their points of leakage and conserve this precious resource. Finally, utilities across all sectors seek to engage their consumers. In the power sector, that trend will grow a new market in Web-based presentment, in-home energy displays and programmable appliances that will spread to mobile devices via iPhone apps and social networks. Itrons technology enables this engagement, for utility efficiency and customer satisfaction. Itron and our partners are right there with you to meet our collective future, Unsworth concluded.
thought lEAdErshiP sPonsorEd by itron
EnergybizMag.com
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2010: Itrons 29th Annual Users Conference

Did you know we live in exponential times? It took radio 38 years to reach a market audience of 50 million. To reach a market audience of 50 million, television needed 13 years; the Internet, only 4 years; iPods, 3 years; and Facebook, 2 years. Only 1,000 Internet devices existed in 1984. In 2008, that number surpassed 1 billion.
theme, Discover 2010, was apt. The throng came to discover answers to day-to-day operational challenges and strategies for the future. And with seven tracks, more than 125 sessions, networking opportunities, a Knowledge Center on Itron solutions and a Partner Pavilion to illuminate the larger ecosystem, answers were in abundance, waiting to be discovered.
Keynotes laid the groundwork

Russ Vanos, vice president of marketing at Itron, exhorted the assembled to ponder a few fundamentals. Do we really know our customers? What they need? What they want? Tomorrows customer will look a lot different than they do today, Vanos told his audience. Were moving from reactive to proactive interactions. Vanos introduced Paula Hadley, who supports gas operations at Southwest Gas and who served as chairperson of Itrons Users Advisory Board. Hadley and Bill Cloutier, Jr., manager of smart grid interoperability standards at DTE Energy, reminded the audience that this was in fact their conference, designed by the users of Itrons technologies and services to meet their needs. With the stage thus set, Malcolm
sPECiAl rEPort sPonsorEd by itron
These intriguing factoids flashed across a big screen in a large ballroom at the Omni Orlando Resort at ChampionsGate in Orlando, Fla., where nearly 1,000 people from more than a dozen countries gathered for the 29th annual Itron Users Conference. The numbers, presented in Did You Know? a YouTube video, were intended to dazzle the mind with the pace of change.
For many in the audience, this rapid acceleration in market development was not news, but instead mirrored their day-to-day duties running electric, gas and water utilities in an era governed by rapid change. Moments earlier, the phrase our global energy future had flashed across the big screen. A narrator intoned other
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phrases such as operational efficiencies and lower carbon footprint and stated, consumer empowerment will transform the energy landscape. All this would be an eye-opener for the uninitiated, but Itrons customers and partners had gathered for an annual conference to share solutions to these challenges with their peers. Thus, the conferences
Special Report: Discovering a Smarter Future

Sponsored by
Unsworth, president and CEO of Itron, commanded the floor for a brisk tour of the world and a bracing reminder of the challenges posed by rapid change. The way we manage energy and water will shape our century, Unsworth said, repeating that mantra to ensure it sank in. Utilities need flexible solutions
sectors, Unsworth continued. And new forces are driving change, as well. Utilities are morphing from top-down, unidirectional suppliers of energy and water to become organizations that interact with their customers, requiring engagement and communication. This new landscape has led Itron to develop an unparalleled ecosystem of
city, which has experienced the most difficult economy in our lifetimes. Kurmas description of recent history really spelled out many of the forces buffeting utilities in North America since the 1990s, which included attempts at deregulation, mergers and expansions, the rise of merchant generation and energy trading, and the turbulent cross-
to efficiently and effectively manage the worlds resources and Unsworth emphasized that Itron, with more than 100 partners, has a global footprint in 130 countries with 8,000 customers speaking more than a score of languages. That track record reflects a pragmatic focus and a disdain for hype, he implied. We offer solutions rooted in reality, Unsworth said. We are a truly global company operating locally. And we understand the challenges and complexities of utility issues. Perennial concerns about reliability and safety have been exacerbated by aging infrastructure across the electric, gas and water
partnerships and to make aggressive investments in research and development and business analytics to serve its customers and their new mandates. Understandably, Unsworths pledge was greeted warmly.
Dateline: Detroit
Unsworths offer of solutions rooted in reality had a willing listener in Steven Kurmas, president and chief operating officer at Detroit Edison, an investor-owned utility serving southeast Michigan. Kurmas took the podium next and described a tumultuous decade in the industry and some rough years for his beleaguered
currents that resulted. By the mid-2000s, Kurmas said, it was back to basics with environmental regulations and requisite spending to meet them, a decrease in capacity due to difficult economic times and higher fuel costs. Today, mandates to integrate increased amounts of renewable energy, updating aging infrastructure and decreased dependence on coal all with no increase in load has delivered a heaping plate of challenges. Large investments with a decreasing load are a real predicament, Kurmas noted. The utility executive also noted that while Detroit Edison and its peers
traditionally have focused on customer affordability, that guiding principle has morphed into customer satisfaction. Not that affordability has dropped from view. Kurmas noted that his customers have been hit disproportionately hard by recent developments and not just by the automobile industrys woes in Detroit. The average ratepayer shells out 3.7 percent of their out-ofpocket expenses while ratepayers in Detroit pay as much as 10 percent and live in under-insulated homes, according to Kurmas. To meet the affordability challenge, utilities must increase productivity, pace their investments and invest in technology that facilitates the balance between customer affordability and satisfaction, Kurmas said. Detroit Edisons parent company, DTE Energy, has done this with its SmartCurrents program by investing in Itrons OpenWay smart grid platform, realizing an increase in net income.
Critical asset: your people

The technology landscape is not the only place where the ground is shifting. Utility workforces will be retiring in droves in the next five years, and capturing departing employees knowledge and experience while attracting and training a new generation of workers will be as critical as adopting technology, according to Robert DeLoach, general manager and CEO of the Cucamonga Valley Water District in Southern California. High-performance organizations are driven by three factors, DeLoach said: emerging workforces, visionary leadership and the impacts of
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their corporate culture. Soon, half a utilitys workforce is lik ely to be under age 30 and, by retirement, this emerging workforce will have had 10 to 14 jobs. That means, to DeLoach, that hiring should be based on values, not skills. Self-direction will be a primary value, one that means that CEOs roles will involve supporting their workers. Strategic planning used to be a top-down exercise, based on known data. In coming years, organizations are likely to design their own futures without knowing all the steps along the way, a quote courtesy of the Harvard Business Review. That method of planning will require organization-wide input into forward-looking strategies, according to DeLoach. How important are these foregoing points? Corporate culture impacts productivity and performance, DeLoach said. Ask yourself what your customers think of your company and brand. Is it U.S. Postal Service or U.S. Marines? he offered.
Best Practices. Sessions included Occupational Dog Bite Prevention Training, Plug-in Electric Vehicles, Complex Billing Issues Solved and Transitioning from Utility-focused Services to Customer-focused Services. The offerings drew bustling, energized audiences and many sessions were guided by representatives of Itrons utility customers who shared their findings and insights with their peers. Half-hour breaks between sessions allowed ample time for networking in the hallways and exploring the informative offerings in the Itron Knowledge Center and nearby Partner Pavilion.
Sessions: from dog bites to business analytics

With these vivid reminders of the challenges ahead, attendees then dispersed to follow their choice of educational tracks, which included Analytics, ChoiceConnect, Consumer Engagement & Demand Response, Metering & Control Technology, OpenWay and Utility Operations & In the Knowledge Center, Itron customers could learn about the companys newly revamped Web site, which offers a simpler user interface and intuitive options for accessing account information, technology overviews and case studies of Itrons solutions. Visitors could experience interactive displays illustrating

Sponsored by
Itrons meter data collection processes, the companys hardware and software solutions, and its communications networks, system design and analytics, forecasting and smart grid. Next door, in the Partner Pavilion, more than two dozen Itron partners offered to explain their value-added products and services. The products and services included consulting, in-home energy displays, communication networks, systems integration, business analytics, mobile workforce devices, demand response and geospatial information systems. The range of sponsors, Itron partners all, reflected the industrys most influential names, including Capgemini, Microsoft, Certicom, IBM, Digi, Nighthawk, Panasonic, RouteSmart, Accenture, AT&T, Comverge, HP, Infosys, Johnson Controls, SAP, SmartSynch, Tendril, Teradata and Verizon Wireless.
Cisco and Itron: speaking the same language

One packed session was devoted to the implications of the recently announced alliance between Itron and Cisco. As information technology and operations technology become more tightly entwined, a direct connection from meter to IT has gone mainstream, said Rich Creegan, Itrons vice president for strategy and marketing. That calls for a platform that answers utilities needs for interoperability, security and scalability, he said. Itron and Cisco believe they have the answer to these challenges. Specifically, the two companies are jointly developing a standards-based, highly-secure technology for full
IPv6 implementation of field area communications to support smart metering, intelligent distribution automation and interfaces to the customer premise. Itron will license and embed Cisco IP technology with its OpenWay meters and distribute Cisco networking equipment and software as part of its smart meter deployments. At one time, meters served a meter-to-cash function, observed Paul De Martini, now the chief technology officer for Ciscos smart grid team, formerly the vice president in charge of advanced technology for Southern California Edison. Now, the meter is an integral part of the distribution system, an interactive role that can be leveraged for much greater operations insight and business value. The vision, De Martini said, is to enable pervasive monitoring and control of the grids distribution network to enhance the efficiency and intelligence behind energy delivery, for a low-carbon society. The direct benefits to utilities include protection against stranded assets, simplified deployments, lower total cost of ownership and a standards-based architecture that conforms to evolving security standards and offers multiple business applications. The same structure has served other vertical industries, De Martini said. One IT director asked how to make the sale internally, to which
De Martini answered, simply, reduced operations and maintenance costs for the grid a powerful argument.
Business analytics and the Teradata deal

Another session Active Smart Grid Analytics: System and
Technology Overview detailed the results of another recent alliance, this one formed by Itron and Teradata. With AMR, AMI and meter data management systems second to none, Itron sought to extend its value into the crucial new frontier of business analytics, explained Julie Hance, Itrons vice president for software solutions. In April 2009, Itron inked a deal with Teradata, a world leader in data analytics, management and warehousing, and a company with deep experience in other vertical markets. Drowning in data, starving for
knowledge, is a common phrase that captures the dilemma addressed by the two companies new solution, dubbed Active Smart Grid Analytics. This analytical tool can assist utilities in getting the most business value out of legacy systems or new AMI deployments and it can assist in managing operations and planning and designing grid modernization projects, Hance said. Were helping Itron leverage our experience in managing large volumes of customer data to derive business value and intelligence, said Terry Burns, an executive consultant in Teradatas energy and utilities practice. Teradata has vast if not total market share in numerous vertical industries, from telecommunications to banking, transportation to retail, and now brings that experience to the utility business. High-performing companies across the board use data analytics and, Hance suggested utilities can use this new tool for a variety of applications, including revenue protection, improving the accuracy and timeliness of settlements among electricity market participants, and preventing voltage issues. The list of potential applications is long. This has the power to change your business, Hance said. The importance of these alliances to utilities was underscored later in the day when Thomas Chang of CenterPoint Energy, a large OpenWay customer with 2 million advanced electric meters in the Houston area, gave a presentation about smart meters contribution to performance management and diagnostic work.
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The advantage of analytics, Chang said, can be grasped by considering the following three facts: Four in five business leaders see analytics as a competitive advantage. One in two doesnt have access to key information across the entire organization. One in three business leaders make decisions without the information they need. The aggregation and correlation of events and data are important because they help you focus on the real problem the root cause and reduce time to resolution, Chang said. If you cant measure it, you cant manage it, said copanelist Kevin Klein of IBM.
EVs for meter readers in its sprawling 50,000-square mile service territory. Weve been in the EV world a long time, said Haralson, who proceeded to share insights gleaned from two decades of research and preparation for the pure plug-in electric vehicles and hybrids now hitting the market. Drivers for the uptake of EVs among consumers include the low cost of fuel per mile, reduced maintenance of electric drive trains and the appeal of reducing dependence on foreign oil, Haralson
PEVs: The business of plugging in

One forthcoming wild card for all electric utilities in the United States is the advent of electric vehicles. So its not surprising that a session offered by Southern California Edisons Percy Haralson, manager of field technologies for that utilitys transmission and distribution business unit, was well attended. The utility glimpsed the future nearly 20 years ago, founded its Electric Vehicle Technology Center in 1993 and wields a fleet of
pointed out. Still, he predicted that hybrid vehicles would prove to be most popular, due to consumer unease known as range anxiety about getting stuck without convenient access to charging infrastructure. Of course, one of the biggest concerns on the utility side is how EV uptake and charging will affect local transformer loads. At Southern

Sponsored by
California Edison, transformers typically are sized to handle 100 percent of their intended load, but at peak times they probably handle 150 percent of their nameplate capacity, Haralson pointed out. That heats them up during the peak, but they have an opportunity to cool down overnight. That introduces a what if question on EV adoption, he pointed out. What if utilities succeed in encouraging nighttime charging, perhaps to take advantage of lower-cost wind energy available between sunset and sunrise, and transformers experience two peaks and dont have the time to cool down? Greater numbers of transformer failures are likely, he said. The challenge is potentially way bigger than were thinking, with our conservative assumptions, he said. The good news is, weve got time. But from a utility standpoint, weve got to be prepared for this. Southern California Edison has analyzed its distribution infrastructure and found that the biggest uptake of EVs is likely to take place in areas with the weakest infrastructure, he noted. Thus his utility has a 20-year plan that begins with encouraging nighttime charging at home, readies the utility for local distribution system impacts and eventually leads to billing systems that can track a drivers use of public charging infrastructure away from home. Meanwhile, the key is stakeholder engagement: with customers to register their vehicle, choose a rate and install charging equipment at home; with state and local government to expedite the permitting process; and with third-party installers for proper installation of gear.
OpenWay and cyber security

The fundamentals of providing cyber security for your utilitys business and operations is not only a government mandate, its a way of life going forward, according to Scott Palmquist, an Itron senior product manager. Thus, it helps to understand the motives for cyber security attacks, likely perpetrators and how to define threats, he said. First, why do hackers hack? The spectrum of hackers begins with inadvertent errors that have unintended consequences, typically a careless or poorly trained employee, according to Palmquist. The spectrum further includes disgruntled employees, competitors, organized crime, cyber terrorists, hackers and nation states. The motives range from bragging rights to economic theft to political aggression. Palmquist noted that security defined calls for confidentiality (only authorized users can view the information), integrity (protecting data from malicious or accidental modification) and availability (data is available when needed by an authorized user). Prioritizing your security strategy means knowing what to watch for and understanding the distinctions between threats (a potential event or attack), vulnerabilities (a weakness that can be exploited) and actual
attacks (an intentional attempt to exploit a vulnerability). Countermeasures require controls, which can include encryption, key management, certificates, authorization, authentication and physical security, Palmquist continued. While automating security to the extent possible is a good practice, its worth noting that the National Institute for Science and Technologys recent cyber security guidelines are more than 70 percent composed of organizational matters. Security is only as good as the people who practice it.
Compliance with regulatory mandates, while important, is hardly the entire solution, Palmquist noted. Smart grid is also a business, he said, and security must map to the business drivers.
Consumer engagement: not business as usual

From the cloistered world of cyber security, attendees might have selected to join Risa Baron from San
Diego Gas & Electric to learn more about outward-looking customer engagement the linchpin to smart meter and smart grid acceptance and, consequently, support by the public. Smart grid will bring more change in the next 10 years than electricity consumers have seen in the past century, Baron told a packed session. Your utility needs to seek actual conversations with your customers to get their buy-in for products and services that will change the relationship.
SDG&E understands that challenge well, for it has deployed 1.4 million meters across a service territory of 4,100 square miles that include 25 cities with a mix of urban and suburban residents, Baron said. The challenge is not simply a technical one, she added. Most of our customers dont have an interest in energy, she said. To overcome inertia and have genuine contact with millions of people, SDG&E devised a set of guiding principles for an AMI rollout. Be proactive. Be collaborative. Work toward mutually beneficial outcomes. Be responsive. Be nimble.
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That sounds good on paper, but what steps did SDG&E employ to achieve a positive outcome? First, it formed a technical advisory panel of stakeholders, including consumer groups, the California Public Utilities Commission, the California Energy Commission and technology advocates in the community. It developed a plan with 30- 60and 90-day goals. The utility phoned customers three or more days prior to a smart meter installation, providing a Web-based deployment map for customer access. The day of installation, door hangers were left notifying the home or business owner that SDG&E had been there and explaining why. Follow-up calls were made and utility ambassadors typically, retired utility employees went door-to-door. Several aha moments occurred in the process. First, smart meter deployment is best scheduled for the smallest seasonal impact; i.e., dont schedule during summer when usage typically jumps and consumers might fear that higher bills are due to the meter installation. Secondly, understand that digital smart meters are very accurate and may be replacing slow or even stuck meters. SDG&E decided its policy would be not to charge consumers for huge initial discrepancies between the old and new meter readings. That stance paid dividends in public relations, she said, and avoided media frenzies.
Also, SDG&E sought to resolve conflicts within three to five days, offering enhanced training to customer service representatives and creating a dedicated escalation desk for emotional disputes. This is not business as usual, Baron said. Metrics on results speak for themselves: Of 1.4 million smart meters installed, SDG&E received 1,780 complaints, or 0.15 percent of the total. High-touch consumer engagement is hard work, Baron noted, but because it is likely to be the beginning of a new relationship with customers whose cooperation you need, make the most of it. Community outreach is not 9 to 5, she said. When you meet over smart meters, talk about what other value you can offer. SDG&E also found that offering immediate value to the consumer was beneficial, so it recommended Googles PowerMeter, which offers day-old energy use data. After customers get a new meter, they ask, Whats next? Baron noted.
Managing our own energy

The sessions described thus far, just a smattering of those offered during the first day of the Itron Users Conference, certainly fired up attendees in search of solutions to their challenges. But Itron was taking no chances. The evening was devoted to a Crazy 80s dinner and dance and the next day began with a motivational speaker who demanded participation. Desi Williamson,

Sponsored by
pacing the ballroom stage like a big cat, exhorted his audience to manage their own energy and find inspiration within. To each of the questions he called out, the audience responded Absolutely! Williamson, a master storyteller, combined drama, humor and visual imagery to bring his audience to its feet repeatedly. Redefine your purpose, he intoned. Raise your own standard of performance. Create the conditions you want. New and better ways to do things begins with ourselves! You cant just drift to the top of the mountain! How far are you willing to go to realize your own potential? Williamson demanded. We can all go further than we have before, further than we think we can! Am I right?! he called. Absolutely! the crowd responded.
Smart meters and societal benefits

Among the sessions offered during the second day of the Itron Users Conference, one standout was a talk given by Itrons own Mike Messenger, an economist and senior principal energy consultant at the company. His talk, Quantifying Societal Benefits from Deployment of Smart Meters: Crucial to Success or Fools Errand? had potentially far-reaching implications for the industry. An appropriate answer to that question might well serve utilities involved in making a rate case, just as it might form the basis for public outreach over a meter deployment. It might also serve smart grid proponents in
government agencies such as the U.S. Department of Energy who engage in the art of political persuasion when setting and defending their priorities. Anyone involved in siting or cost allocation for a transmission line that crosses state lines is already familiar with attempts to allocate benefits, too. We live in interesting times, with the benefit of converging networks, Messenger told his audience. You could argue that the California energy crisis of 20002001 was the birth of smart grid, because we couldnt island the problems, they just spread. Every network originally designed for private gain has yielded 10x in societal benefits, Messenger said. Among the most important networks in history, defined this way, Messenger named money, water distribution, roads, books, Pony Express/mail/email, telegraphs/telephones/ cell phones, high-voltage electric grids, radio/TV and the Internet/ financial networks. Coming next: social networks. Societal benefits might be defined as indirect economic or environmental benefits, Messenger proposed. The growth of electric grids, historically, lowered rates for each consumer, so theres a societal benefit that flowed from an effort at private gain. Today, reduction of pollution by lowering peak demand or overall demand might be considered a benefit, Messenger offered. While the attributes of a smart
grid yield operational benefits, would those benefits in the aggregate begin to approach societal benefits? Certainly, Messenger suggested, reduced prices, reductions in pollution and increased trade are candidates for consideration. The moving pieces in a network require careful attribution of costs and benefits, Messenger said. While utilities will track those costs and benefits for their own business
cases and for regulators, who will track societal benefits, and how will they do so? Messenger asked rhetorically. Some means of tracking should be devised because social benefits are diffuse and hard to come by, Messenger concluded. Yet the advantages of quantifying societal benefits would seem to be self-evident and sufficient to justify the effort. Sound like topics youd like to hear explored further? Planning for the 30th annual Itron Users Conferenceto be held in Phoenix is already under way. Well see you there.
TEChNOLOGy FRONTiER
FutureGen 2.0
IS IT A BREAKTHROUGH PROjECT? // By GARy m. STERN
aFter seven years oF starting, stoPPing
an artist conception released by the u.s. department of energy of a one-of-a-kind power plant that will be the worlds cleanest fossil fuel and enduring major permutations, the fired power plant, according to the energy departments Web site. // FutureGen 2.0 project in Illinois is finally back on Photo by AP Photo, U.S. Department of Energy track to retrofit a power plant with an innovative carbon capture and storage system. FutureGen 2.0 fossil fuels. Approximately 1.3 tons of CO2 will be is a partnership among the U.S. Department of captured and stored annually. Meredosia will be one Energy, the FutureGen Alliance, a nonprofit consorof 10 DOE carbon-capturing demonstration plants. tium of coal-mining and coal-producing global When completed, FutureGen 2.0 will serve as energy companies and Ameren Energy Resources. the worlds first coal-fired power plant capturing FutureGen launched in 2003 during the Bush admin- carbon at a rate greater than 90 percent and be fully istration, intending to build a new $2.4 billion greenfield integrated with a pipeline and CO2 storage hub, carbon capturing power plant in Mattoon, Ill., but stalled said Kenneth Humphreys, CEO of the FutureGen due to rising construction costs. After Alliance. Meredosia will serve as a model several delays, FutureGen 2.0 was when most countries adopt strict carbon EnergyBiz scaled back to a $1.4 billion upgradrestrictions and require cost-effective Leadership ing of a 200-megawatt Ameren plant techniques that capture carbon at a higher Forum 2011 in Meredosia, Ill. rate and stores it in deep saline, he said. energybizforum.com To make it cost efficient, To finance the $1.4 billion project, the FutureGen 2.0 morphed into United States is providing $1 billion in learn more about Futuregen at our forum repowering and modifying an stimulus funds, FutureGen Alliance is supin Washington, Feb. 27 existing power plant, building a plying $250 million and Ameren, Babcock march 1, where kenneth brand-new boiler to create oxy& Wilcox and Air Liquide Process & humphreys, Futuregen combustion and piping steam Construction are spending $150 million alliance chief executive officer, will be a featured to redesign and retrofit the plant. Ryan through turbines, explained James speaker. Cornell, a spokesperson for engineers Markowsky, the Department of Babcock & Wilcox, said it has made Energys assistant secretary for
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significant R&D investments in oxy-combustion in the past and said FutureGen can validate the potential of carbon capture coupled with geological storage as a technology-based solution to greenhouse gas mitigation that is important to the nation. The Meredosia project will create about 750 jobs for constructing the plant and pipelines and 125 permanent jobs to run it. The site will also include a crafts training center that will prepare workers in welding and iron work and electricians to handle the retrofitting of power plants to meet new EPA guidelines. In addition, the site will include an oxycombustion information center. The project links the DOE with the FutureGen Industrial Alliance, a nonprofit consortium of 10 global companies: Alpha Natural Resources, Anglo American, BHP Billiton, Caterpillar, Exelon, Consol Energy, E.On, Peabody Energy, Rio Tinto Energy America and Xstrata Coal. FutureGen Alliance emerged as a way for coal producers to collaborate with the DOE on clean energy projects. Originally it had six members, grew to 13 members, fell back to eight, and recently added Caterpillar and Exelon. Forming partnerships among global not just domestic companies is critical because some forecasts predict that 80 percent of carbon emissions through 2035 will stem from China and India, Markowsky said. Humphreys noted that a niche U.S. or niche Australian solution wont help people survive in a carbon-constrained world. Yet China Huaneng Group and other leading India-based energy companies have not joined the FutureGen Alliance. Competitors are collaborating because global energy companies need to get near zero emissions from coal-fired power plants on the ground and get a good understanding of its costs and performance, and the legal, regulatory and insurance structure to govern it, Humphreys said. Moreover, working jointly helps manage costs and reduce risks, and global companies can learn from a U.S.-initiated strategy and apply it in their locale. The FutureGen Alliance faltered in 2009 when Southern Company and AEP withdrew. AEP joined the FutureGen Alliance because it supported cutting-edge technology for future coal-fired electricity generation, said AEP spokesperson Melissa McHenry. When the DOE suspended funding, AEP opted to invest in its carbon-capturing Mountaineer, W.Va., plant. Southern Company also supported FutureGen Alliances efforts because it believes the acceleration of clean coal technologies such as CCS is
needed to ensure continued economic and energy security, said spokesperson Valerie Hendrickson. But it too resigned from the alliance to concentrate on its own carbon capture and storage projects including a carbon research center in Wilsonville, Ala. As CEO of the FutureGen Alliance from 2005 until August 2010, Michael Mudd led it through two presidents, two secretaries of energy, and six secretaries of fossil energy. Each fossil energy secretary differed on whether it would focus on demonstration or R&D. It was challenging to stay the course, he admitted. Yet Mudd sees the scaled-back plan as helping to keep coal as a power source and meeting a critical need to prove that carbon capturing and sequestration can be integrated into a power plant of that scope. Feeling burned out, he resigned so new leadership could move the project forward. Becki Clayborn, a Chicago-based regional representative of the Sierra Club, questions whether large-scale carbon sequestration such as FutureGen 2.0 can be effective. Until rules are put out by the federal government on how to regulate it, monitor CO2, determine who has the liability and how much it costs, there are many unanswered questions, she said. DOEs Markowsky acknowledges that liability laws have only been passed in four states and need to be resolved elsewhere. Federal stimulus money could accomplish more if it were invested in proven strategies of renewable energy and energy efficiency, Clayborn suggested. Could you imagine what we could do with $1 billion to retrofit existing buildings to be more energy efficient and also produce wind turbines and solar panels? she asked. Humphreys countered that the investment is well spent because FutureGen 2.0 tests solutions for the 300 gigawatts of coal-fired generation plants operating globally that will eventually need to comply with carbon restrictions. If FutureGen2.0 proves effective at capturing 90 percent and more of carbon emissions, it could lead to including coal plants in a diversified portfolio, and it could limit pollution and develop green tech jobs. With the change in leadership in the House, is FutureGen 2.0 going to move forward or stall again? Humphreys replied that the moneys in place and under contract. In spite of its ups and downs, weve enjoyed bipartisan support.
...there are many unanswered questions.
TEChNOLOGy FRONTiER boosting nuclear Fuel

By SALVATORE SALAmONE
there is a w ide-scale industry eFFort
to evaluate a new cladding material for nuclear fuel rods. The new material has the potential to last longer, burn more of the fuel in a rod, reduce the amount of radioactive waste that must be stored, and enhance safety margins in certain situations. The cladding is a ceramic composite material based on silicon carbide. It is intended to replace the zirconium-based metal, zircaloy, cladding that has been used since the 1950s. Investigative and development work on the new cladding is being done by researchers from the Department of Energy, the Energy Power Research Institute, Massachusetts Institute of Technology, Idaho National Laboratory, Oak Ridge National Laboratory, Westinghouse, and other organizations. The work is part of a broader effort to look into longevity issues as plants are relicensed and the industry looks to extend plant life beyond 60 years. We want to know what the potential issues will be, said Maria Korsnick, chief nuclear officer and senior vice president, Constellation Energy Nuclear Group. Were focusing on material aging of concrete, reactor vessel internals and new cladding materials. Although it has had a very good track record of safe use in nuclear reactors, zircaloy becomes susceptible to failure over the long term. As a result, fuel rods are often taken out of service even though they may have a substantial amount of fuel remaining to produce energy. To improve the resiliency, research has focused on finding a material that can withstand the conditions in a nuclear reactor core. Many things like exposure to water and radiation degrade cladding, said David Carpenter, a researcher in the MIT Department of Nuclear Science and Engineering. With the new material, silicon carbide fibers would be wound into a composite tube that is the same size and shape as traditional zircaloy cladding. The advantage to using the new material is that silicon carbide has several characteristics that make it well suited to the reactor core environment. It has excellent strength at high temperatures, works well with water, has very low neutron absorption and resists radiation damage, according to researchers at MIT. As a result, silicon carbide cladding potentially can last longer in a reactor core environment. If this proves to be the case, this would allow more of the fuel in a rod to be burned. And this, in turn, would
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reduce the amount of radioactive waste that would need to be managed and stored. The new cladding is also being eyed to provide an extra margin of safety. In extreme situations, such as happens when there is a loss of reactor coolant or a major seismic event, the current metal cladding can melt or burst. In such rare events, you have limited time to respond and you may lose the integrity of the fuel rod, said Ken Yueh, senior project manager, EPRI. In fact, investigations of the Three Mile Island accident found that a stronger cladding material might have averted some of the problems that arose during the reactors shutdown. The silicon carbide cladding is potentially more resilient. The material should not burst as the fibers in the ceramic composite are expected to hold together. There also might be an economic advantage to using the new material. The ability to burn more of the fuel and to have less material to store would naturally factor into any economic justifications for replacing the tried and true zircaloy-cladded rods used today. And because rods with the new material would not have to be replaced as often, a plant operator might have lower operating and maintenance costs. However, at the current time, there are no estimates as to the cost of producing commercial quantities of the silicon carbide material or of using fuel rods with the new cladding. Evaluation of silicon carbide-cladded fuel rods in commercial reactors could begin as early as 2015.
we want to know what the potential issues will be.
Gatherings//Technology Frontier
Feb. 1-3 Feb. 10-11 distributech municipal solid Waste to biofuels
san diego chicago
Koreas highway
EmBRACING RENEWABLES AND SmART GRID // By SALVATORE SALAmONE
suPerconducting cables, while oFFering
hp-ad-1.qxd
10/5/04
potential benefits over their copper counterparts, have been used sparingly to date. That situation is about to change. In particular, Korea Electric Power Corp. has included superconductor power cables in its Smart Green Utopia plan to convert Koreas entire power grid. The plan includes incorporating renewable energy sources, using smart grid technology, deploying electric vehicle charging stations, developing carbon sequestration systems and modernizing the electrical network. To accomplish these objectives, KEPCO will use superconducting cables in parts of its transmission and distribution systems. Additionally, the company and its technology partners are exploring the use of direct current superconducting cable for transmitting renewable energy around the peninsula. This is a very aggressive plan for deploying superconducting cable, said Jack McCall, director of business development
8:01 PM Page 1
T&D systems, at American Superconductor. To provide the superconducting cable for this and other projects, the South Korean company LS Cable has ordered roughly 1,800 miles of Amperium superconducting wire from American Superconductor. Amperium is a proprietary, high-temperature, superconducting, thin, ribbon-shaped wire capable of conducting more than 100 times the electrical current of a copper wire of the same size. LS Cable will use the wire to make the superconducting cables that will be deployed in the electrical system. The 3 million meter order is believed to be the largest superconducting wire purchase ever for an electric grid project. This contract helps ensure we will have the wire we need to complete the superconductor cable projects we have under way with KEPCO in Korea and also take on commercial project opportunities globally such as Tres Amigas in the United States, said LS Cable President Jong-ho Son.
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METRiCS
PowEr BoosT
$81.1 $89.4
sagging design Work

Power design work [billions]
Power Construction [billions]

$66.1
$7.2
20 09 20 08
2007
$42.2
$38.4
$35.6 $41.5 $36.8
20 03 20 02
Construction of power 20 plants, substations, 06 transmission and distri0 2 bution grids and transform05 ers and more soared to 0 2 $89.4 billion in 2009 just as the 04 recession was grabbing hold, The 2009 pace of spending was more than one-third above spending just two years earlier, according to the data compiled by the U.S. Census Bureau.
20 07
$9.1
2008
$7.8
2009
Source: enr magazine
Source: U.S. Census Bureau
top power Firms

Revenues [millions]
The 500 largest engineering and architecture firms did $7.8 billion in power work in 2009, slipping from 2008 levels but ahead of 2007, according to ENR magazine.
Source: enr magazine
$681
$566
$565
$523
$523
the shaW group
bechtel
black & Veatch
urs
sargent & lundy
greenhouse gas reductions lauded

A handful of energy companies are leading the industry in efforts to reduce their greenhouse gas emissions, according to the Environmental Protection Agencys Climate Leaders Program Web site. These companies have been recognized for setting and achieving emissions reduction goals through their participation in the Climate Leaders program.
company american electric power
state oh
pledge american electric power pledges to reduce total u.s. greenhouse gas emissions by 6 percent from 2001 to 2010. american electric power achieved its initial goal by reducing emissions by 4 percent from 2001 to 2006. calpine pledges to reduce u.s. greenhouse emissions by 4 percent per megawatt-hour from 2003 to 2008. entergy pledges to reduce total u.s. greenhouse gas emissions by 20 percent from 2000 to 2010. exelon achieved its initial goal by reducing total greenhouse gas emissions by 38 percent from 2001 to 2008. pseg achieved its initial goal by reducing greenhouse gas emissions by 31 percent per kilowatt-hour from 2000 to 2008. green mountain energy met its initial goal of achieving net zero greenhouse gas emissions by 2005 and maintaining that level through 2009.
calpine entergy exelon public service enterprise group
ca la il nJ
green mountain tX energy
Source: U.S. Environmental Protection Agency
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iNTRODuCiNG
a consortium of technology and investment companies announced that it is devoting $1.8 billion to building a network of transmission lines along the atlantic coast during a news conference in the national press club in Washington last fall. From left to right are dan reicher, formerly with google, rick needham, from google, richard straebel, from marubeni power, John breckenridge, from good energies, and robert l. mitchell, from trans-elect.
AP Photo by Pablo Martinez Monsivais
trans-elects big splash

ATLANTIC CABLE TO SPUR OFFSHORE WIND // By mARTIN ROSENBERG
a ProPosed undersea transmission cable in the atlantic ocean
is so bold, according to one news account, it would transform the regions electrical map. Trans-Elect wants to build a $5 billion transmission line that could jumpstart Americas offshore wind generation of power. To better understand the game-changing proposal, EnergyBiz recently interviewed Robert L. Mitchell, Trans-Elects chief executive. His comments were edited for style and length.
EnErgyBiz
EnergyBiz Leadership Forum 2011

energybizforum.com learn more about trans-elects ambitious atlantic transmission project at our forum in Washington, Feb. 27 march 1, where robert l. mitchell, trans-elect chief executive, will be a featured speaker.
Your Atlantic Wind Connection is a $5 billion transmission
project.
MitChEll Its a $5 billion contract for the hard costs. So its going to be more than that because there are going to be regulatory programs and cost of capital, and interest during construction, etc. They will exceed $5 billion over the next 10 years.
EnergybizMag.com
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What is the importance of this effort? America has to decide whether or not it is going to continue to be dependent on foreign oil and spend billions and billions of dollars with countries that are not friendly to us. One of the ways that we can make a dent is by developing a new source of crude energy off our Atlantic coast. In order to have an impact on oil, we have to develop the electric vehicle, which will require more electric energy. As a society, we have largely already made the decision that we do not want to use coal to the extent that it has been used in the past. And while natural gas is less polluting than coal, it nevertheless is polluting.
EnErgyBiz MitChEll EnErgyBiz Your transmission effort is unique in that its a project that is going to drive construction of generation, whereas typically its been the other way around. How will it unfold? MitChEll Our plan is to have the backbone system completed in the year 2020. The goal would be
the development of 6,000 megawatts of wind at the same time. Thats about the equivalent of five or six nuclear power plants.
EnErgyBiz Do you see the potential for this spurring further development and expansion of offshore wind generation along the Atlantic seaboard? MitChEll Yes. Theres interest in South Carolina and North Carolina. There have been efforts to look at optional wind in the Northeast, which has a terrific wind quality.
How far offshore will your lines be, and would your installation require floating platforms or anchored wind turbines? MitChEll Theres the potential for 64,000 megawatts of offshore wind off the mid-Atlantic in 90 feet of water. We will be using direct-current
EnErgyBiz
our plan is to have the backbone system completed in the year 2020.
going deep for Wind

BUIlDING A MID-ATlANTIC OffsHORE WIND INDUsTRy By MARkIAN MElNyk
Strong networks are the foundation of a modern economy. Railroads, highways, communications, air traffic and electricity networks provide the capability to move people, goods, information and energy. Networks can make possible transactions that would not otherwise have happened, and high-capacity networks eliminate bottlenecks that stifle business and cause markets to be inefficient. Networks support a growing economy and save us money. Networks benefit us all. The wide open spaces of the MidAtlantic outer continental shelf sit next to the New YorkWashington megalopolis. The shallow waters and powerful winds of this region are capable of supporting tens of thousands of megawatts of offshore wind energy. States in this area need large new sources of renewable energy, and offshore wind offers the best, utility-scale renewable energy option. The conditions for the birth of a new sustainable offshore wind industry are ripe, but there is one problem. There is no existing offshore
transmission infrastructure and the regions terrestrial grid is congested and generally weak along the coast. The Atlantic Wind Connection provides an elegant solution. It is an offshore transmission backbone that links multiple wind energy production areas that have been screened to minimize permitting conflicts. The projects high-capacity system, using advanced high-voltage direct-current technology, allows wind farms to be built larger, tapping into economies of scale. And, because high-voltage direct-current transmission allows energy to travel long distances with low losses, the project provides an efficient pathway for wind energy to reach the load centers in northern New Jersey, southern Virginia and the strongest grid nodes far from the coast. The backbone mixes offshore wind variability over a regional scale, making offshore wind energy delivered by the system less intermittent and more reliable. Controllable HVDC converters at project terminals can react quickly to function as a source or sink to help balance the regional grid. As offshore
winds subside at various times, some terminals can accept conventional generation to supplement the fading wind energy, allowing other terminals to continue to deliver firm power. The projects dual-use nature delivering offshore wind and conventional power depending on the weather is what makes it so valuable. Since offshore winds provide about a 40 percent capacity factor, investments in single-purpose transmission ties produce no benefit about 60 percent of the time. Also, building an offshore wind industry without a backbone will be an uphill struggle against a congested grid and weak coastal infrastructure. Without a backbone, each offshore wind farm developer would have to build its own offshore transformer platform, lay a single-purpose subsea transmission tie to a coastal substation, and pay for upgrades to the grid needed to accept the offshore wind energy injections. The first few offshore wind developers will occupy a handful of points on the coastal grid that have the greatest capacity and require the lowest upgrade expenditures. Developers that come along later will pay much more possibly hundreds of millions of dollars to connect at weak coastal nodes. Instead of driving costs down
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cables that will enable us to go out to sea 17, 18, 20 miles offshore for the development of the wind farms. The first four wind farms that have been identified off of Delaware and New Jersey are planning on using alternating-current technology to build all the tie lines to shore. If we are able to develop the backbone first, which is going to be from the Atlantic City area going south to Delaware, the first leg may in fact not need to go out 20 miles. But subsequent segments could go out 20 miles if needed.
EnErgyBiz Is this cutting-edge technology, or is this known engineering and technology that youre developing here? MitChEll Its known technology and engineering. There is a new dimension. The new dimension will be that the system will have multiple points of input and multiple points of outtake. The whole project is 350 miles long and we broke it out into five segments that will ultimately enable us to run from northern New Jersey to Norfolk, Va.
The construction will be in five stages? Yes. The first phase cost is estimated to cost $1.8 billion. The project will require about 25 percent as equity. Assuming that its somewhere in the neighborhood of $500 million, the development team will have to put up about $50 million, plus $187.5 million each from Good Energies, an investment firm, and Google, and $75 million from Marubeni, a Japanese trading company.
EnErgyBiz MitChEll
What is Good Energies? MitChEll Good Energies is a private equity fund that is committed to funding renewable energy projects, or in this case, a transmission line that supports the renewable energy. And it is money that is from a family fund that largely is European.
EnErgyBiz EnErgyBiz What is your view of a transmission company marrying up with Google, a giant information company? What are the implications of that? MitChEll Google has a corporate agenda of doing
through scale and learning, we will see an upward-sloping cost curve as increasing interconnection costs drive up the cost of each subsequent project. That is not smart planning and it is not the way to build an industry. The backbone transmission project fixes this problem. It is a modular, integrated system that can be built in phases as offshore wind energy develops. As the phases progress, an offshore backbone takes shape
that both connects wind energy and strengthens the existing grid. Adding an offshore transmission corridor running north and south reduces congestion that inflates prices, with the result that energy markets operate more efficiently and with improved reliability. These benefits save money for consumers and help the project to pay for itself. Predictability is another benefit. Offshore transmission capacity for large-scale wind energy develop-
markian melnyk
ment sets the stage for industry to locate in the region and job growth. Instead of exporting dollars and jobs overseas, the regions huge energy demand becomes the source of its economic rebirth. Interior Secretary Ken Salazar called offshore wind Americas new energy frontier. Americas westward expansion would not have happened without a plan to build a railroad network spanning the continent. Later, power authorities in the western states and the Tennessee valley built hydroelectric dams and transmission systems. These bold initiatives benefitted generations of Americans. They were doubtlessly criticized by some as folly, impractical, unaffordable and unneeded. Fortunately, past leaders saw the wisdom of investing for the long-term good. At this historic moment, we have the choice to build an offshore wind industry that will provide clean energy and jobs now and for generations to come. Lets invest now to earn the prosperity of the future. Lets build a foundation for energy independence and growth in the Mid-Atlantic region.
Markian Melnyk is a principal of Atlantic Wind Connection and author of offshore power: building renewable energy projects in u.s. Waters.
EnergybizMag.com
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what they can to help improve the environment in this country and in the world. I do not have a clear picture as to what all the implications will be of connecting with an information technology giant like Google, but we need to think out of the box and we need to think boldly. Have you ever met Eric Schmidt, Googles chief executive? MitChEll I havent.
EnErgyBiz MitChEll This will be a shocking response, but theres a good possibility that it will actually improve. Theres going to be more support for renewable energy. I know that that runs counter to conventional thinking. I invite you to look at the four states that were involved with. We have two Democratic governors and we have two Republican governors. Gov. Christie in New Jersey and Gov. McDonnell in Virginia, and Gov. OMalley and Gov. Martel of Maryland and Delaware, respectively. If you look at their positions on offshore wind, you would not be able to distinguish a political party. These governors understand that offshore wind offers maybe one of the best opportunities that any of these four states have for economic development. EnErgyBiz You have said there could be 54,000 megawatts of offshore wind developed by 2030. Will the federal government have to play a major role? MitChEll State and the federal governments are going to have to play a role. For as many years as the oil, gas and coal industries have been in business, our government and our taxpayers have subsidized fossil fuel exploration by allowing companies to avoid billions of dollars of taxes and subsidies. Republicans have largely promoted such subsidies. Here with wind theres an opportunity, and it will require subsidies.
Google is perceived as swashbuckling and entrepreneurial. The transmission business is viewed as a plodding, mechanical business. What does it say about the new era were entering that these two cultures can get together? MitChEll At the moment, I do not see exactly what that path will be. But technology and electricity are changing. One reason for going to Google is that I knew that they had accumulated investment capital. I can say that those who championed the project within Google, like Dan Reicher and Rick Needum, see this project as transformative. Thats their word. Theyve looked at this investment as a smart place to put money.
EnErgyBiz
When does work begin and end? The first leg would start in 2013 and be completed in 2016. Subsequent segments would be built over the next four or five years.
EnErgyBiz MitChEll EnErgyBiz How many miles of transmission does Trans-Elect currently own and operate? MitChEll At one point it was over 12,000 miles. We have liquidated all of those assets. Right now, we are a development company. We are not following the typical model of being reactive. Were taking a proactive approach to building transmission. We are beginning to get confirmation that putting in a backbone will stimulate enormous attention and interest in developing offshore wind.
... we need to think out of the box and we need to think boldly.
What will be the economic impact? If we reach a critical mass, factories to support offshore wind will be developed along the Atlantic coast turbine manufacturers, blade manufacturers, cable manufacturers and shipbuilders. In a typical offshore wind turbine, there are 2,500 to 3,000 parts. There are going to be hundreds of opportunities for small businesses to develop to support the offshore industry in the country.
EnErgyBiz MitChEll
Now that the Republicans have taken control of the U.S. House of Representatives, will there be less federal subsidies for renewables?
EnErgyBiz
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How will TransElect shape the future of the energy industry in this country? MitChEll When I took the steps to initiate the formation of Trans-Elect in 1998, we created the first independent transmission company in America. A lot of people said we were crazy. Today there are probably 12 to 15 independent transmission companies, and the independent transmission companies have some of the most creative and inventive ideas for solving transmission challenges that exist. This industry does move slowly. Its largely dominated by monopoly utilities and it is not in their interest to change much. One or two of the utilities seem to be resisting the idea of a backbone transmission line for offshore wind. If we want to maintain our economic position in the world, were going to have to get inventive on how we organize, develop and provide energy.
EnErgyBiz
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LEGAL EAGLE Pipeline Proliferation

GETTING SHALE GAS DELIVERED // By STEPHEN BARLAS
natur al gas Prices may be stuck in the
bargain basement, but pipeline companies are rushing to connect to shale gas fields in the southern and eastern United States as if they contained gold. Two Energy Transfer Partners interstate gas pipelines came online on December 1, both ahead of schedule, one serving the Haynesville Shale and Bossier Sands producing regions in Louisiana and East Texas, the other the Fayetteville Shale producing region in Arkansas. Further north, in the Marcellus play, which laps Ohio, Pennsylvania and New York, shale producers are grabbing up firm transportation on existing pipelines, pushing conventional gas producers that held nonfirm carriage to look for new pipeline service. That is where Dominion Transmissions proposed 110-mile pipeline in West Virginia and Pennsylvania comes in, according to Dominion spokesman Dan Donovan. But multiple new shale-gas-only pipelines are also on the boards. Tennessee Gas Pipeline (TGP), a subsidiary of El Paso Corp., has three separate projects on the boards in Pennsylvania. The Federal Energy Regulatory Commission held scoping hearings in Pennsylvania the first week of November for TGPs Northeast Upgrade project, which includes 37 miles of pipeline and additional compression. Tennessee has executed binding, 20-year term agreements with two prominent Marcellus Shale producers, Chesapeake nuClEAr liCEnsE FlAP Energy Marketing and a group of nuclear Statoil Natural Gas, foes are attempting to block nextera energys for 100 percent of the proposal to relicense projects capacity. Robert its seabrook nuclear Newberry, an El Paso plant for an additional 20 years, according to spokesman, says the Fosters Daily Democrat application process has in dover, n.h. the plants license is been going smoothly set to expire in 2030 and at FERC. We havent nextera would like to extend that to 2050. experienced any real problems, he said. FEds nixEd Damien Gaul, an the city of bismarck, n.d., is returning economist with the Energy $62,000 from the federal Information Administration, government intended to launch an energy a division of the U.S. technology center Energy Department, says saying the effort is not feasible, according to the rapid, sometimes the associated press. ahead-of-schedule
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completion of shale pipelines stems from efficient practices at FERC and the proactive approach to infrastructure on the part of the pipeline companies. Even pipeline companies that may have lost out in recent competition to sign up shale gas producers are tapping their toes impatiently, awaiting the next opportunity. Millennium Pipeline announced a few years back that it would compete with TGP along one of the three routes TGP proposed, the one taking natural gas to New York City. TGP signed up the producers; Millennium lost that competition. Millennium spokesman Mike Armiak said, We know we will have another opportunity. The pipeline frenzy in Marcellus was highlighted in an October report from the staff at the FERC. It said, A geographical shift in natural gas production is changing the utilization of the nations pipeline infrastructure. Conventional Rockies gas and Marcellus shale have made Canadian gas, once a mainstay for northeastern markets, an afterthought. Referring to Marcellus, the report said: Much of the new pipeline capacity in the area is targeted at improving the access of shale gas to markets. Marcellus Shale gas production has doubled in the past 12 months to around 700 million cubic feet per day. New pipelines and expansions now being completed should add an additional 725 million cubic feet per day, making a grand total of 1.2 billion cubic feet per day in the past year alone. The EIAs Gaul predicts Marcellus shale gas production will double again over the next few years. He says the pipeline network there now is sufficient, but wont be in the future. A number of pipeline projects are in the works to meet the shale gas production frenzy. The Spectra Energys Texas Eastern Appalachia to Market Expansion project is scheduled to be completed in 2012. Texas Eastern has a second, slightly larger Marcellus project on the boards for completion in 2013. An Inergy subsidiary, Central New York Oil And Gas, announced this summer it will build a 43-mile interconnection in Pennsylvania in addition to its previously announced North-South project that adds compression to its existing Stagecoach laterals in the Marcellus area. John Sherman, president and CEO of Inergy, said the projects allow Inergy to provide the infrastructure necessary to efficiently develop the Marcellus Shale and serve the growing Northeast natural gas markets.
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LEGAL EAGLE Look back

COmPETITION FROm DEREGULATION IN THE EmPIRE STATE // By GARy m. STERN
in 1996, the new york state Public
Service Commission decided to deregulate the states electric power supply, opening it up to competition in 1999. By allowing consumers to choose their own electric suppliers, it aimed to lower prices and improve service. More than a decade later, has deregulation achieved its goals? A study by the U.S. Department of Energy reported that between 1997 and 2009 increases in retail electric prices were significantly greater in states with deregulated electric markets than in regulated states. For example, prices in New York rose from 11.1 cents per kilowatt-hour in 1997 to 15.7 cents in 2009, higher than the 9.9 cent national average. Moreover, a 2009 independent report by McCullough Research noted that after deregulation New York consumers paid the fourth-highest electric prices in the United States. It recommended that New York return power suppliers to cost-ofservice regulation. Why is deregulation raising prices instead of lowering them? A number of factors that go beyond deregulation contribute to high prices in New York, explained Timothy Mount, a Cornell University professor of applied economics and management who specializes in energy markets. New Yorks prices are high because it relies on natural gas to promote cleaner energy, not cheaper coal. In fact, deregulation has made wholesale markets more efficient. Lowering prices would entail managing the distribution system and loads more intelligently, Mount asserted. Deregulation went into effect so that the market can produce better results for customers in the long run than regulators and utilities, explained Joseph Oates, vice president of energy management at Con Edison, once the regulated monopoly for power generation in New York City and still a leading supplier. Deregulation established a wholesale electric market that enabled market forces to set prices and independent system operators to run the grid. Certain constraints in New York keep prices high. Oates noted that half of a customers electricity bill stems from supply costs, 25 percent from delivery
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of transmission and 25 percent from taxes. Lower the taxes and electric bills would dip. Competition has heated up in a deregulation environment. By 2010, Con Edisons market share had declined from 85 percent 15 percent was government buildings served by the New York Power Authority to 40 percent. Its subsidiary Con Edison Solutions and a bevy of independents have been capturing market share by offering fixed prices
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what they were paying for and utilities were compensated for capital expenditures. Now money is fungible. Entergy, for example, doesnt put operating income back into the New York grid. The solution is through innovation, Mount said. Oates says that Con Edison is emphasizing innovation by introducing smart meters and smart grids. Smart thermostats enable customers to program their home air conditioners from their offices, an expanded demand response program rewards consumers for reducing demand, and a smart grid is being piloted in Queens, which allows customers to moderate their electric use and run electricity off peak to reduce costs. While acknowledging that electric prices have risen, Oates says several new power plants have been built without consumers picking up the costs. Under deregulation, consumers can choose a distributor based on price, and the advent of the smart grid could lower costs. Had deregulation not been introduced, prices might have spiked higher. What effect will the recent election of Andrew Cuomo as governor have on New Yorks deregulation policy? Cornells Tim Mount says no one knows because Cuomo has kept his cards close to his chest on energy issues. If deregulation isnt judged by price alone, consumers are benefiting. Consumer advocates wonder if New York could have clean energy, not dependent on coal-powered plants, and find a way to lower prices.
and alternative payment plans, and also by introducing renewable and alternative energy solutions including solar. James Denn, spokesperson for NYPSC, sees the competition and the rise in energy service companies as the prime consumer benefit of deregulating. Customers are making their own choices and can focus on clean power. Or a businessperson can aggregate purchases. Its about choice, selection and opportunity. He also refers to deregulating as restructuring, noting that the state still regulates power generators. But Mount says that energy companies in New York have not invested in scalable ways to encourage renewables, employ smart grids and smart meters, and expand lower carbon efficiencies. Why has deregulation in communication led to the invention of the iPhone and iPod, but deregulation in energy has led to few innovations? With regulated monopolies, consumers knew
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14 59 61 3 53 64 23 27 38-49 5 outside back cover 35 11 7 1 17 inside front cover 19
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Energybiz leadership Forum 32-33
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FiNAL TAkE a nuclear Jolt

THE ECONOmIC STImULUS AmERICA NEEDS // By jIm FERLAND
unlik e many other sectors oF the u.s.
economy, the nuclear energy industry is growing. In fact, its beginning to boom, with the potential to help the United States reduce its carbon footprint while also making a major and positive impact on the U.S. economy over both the near and long term. In spite of the recent economic downturn, energy demand has risen fairly steadily over the past several decades, while investments in new electric generating capacity have lagged. To keep pace with the rising demand for energy and to remain competitive in the global economy, the country will need to add significant new electric generating capacity. Americas fossil fuel-based generating capacity is aging. Replacing the existing infrastructure and adding new capacity to meet growing demand will also have to meet the demand for green energy, helping to reduce greenhouse gases and the use of
carbon-based fuels. But sources such as solar and wind account for less than 10 percent of our electricity supply, and for these sources to meet future demand would not be feasible in many parts of the country. The growth in overall U.S. electricity demand is expected to increase by as much as 30 percent over the next 25 years. To meet that demand and replace those aging fossil fuel plants, the electric utility industry may need to invest as much as $2 trillion in new generation and transmission during that time period. Whats more, it must add this new capacity while reducing greenhouse gas emissions. Today, there are 104 nuclear power stations in the country, which supply 20 percent of our electricity needs while producing zero emissions of any harmful greenhouse gases, such as carbon dioxide, sulfur dioxide or nitrogen oxides. Together, nuclear and renewables represent the 27 percent
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of Americas total electricity supply that comes from clean energy sources, and nuclear power produces three-quarters of it, according to the U.S. Energy Information Administration. Clearly, the best way forward is to expand the role of nuclear energy in our domestic energy supply. Although renewable sources clearly have an important role to play in Americas energy future, the cost and
A nuclear renaissance has arrived ...
Jim Ferland
physical limitations of solar and wind are currently both prohibitive and impractical. Still, America requires new sources of clean and carbon-free sources of baseload energy to fuel economic growth. From an economic perspective, these operating nuclear plants are already making a major contribution to the U.S. economy through direct spending in local communities and in tax payments to federal, state and local governments. Building new nuclear plants will only increase this already significant economic stimulus. For example, construction of each single unit nuclear power plant will create 1,400 to 1,800 on-site construction jobs and hundreds of additional support jobs during the construction period. Once a plant is operational, an additional 400 to 700 permanent operational jobs will be created at salaries that are typically 36 percent higher than the average in communities and towns that are home to nuclear plants. As with existing plants, every new nuclear plant will also produce approximately $430 million annually in sales of goods and services in the local community, creating or sustaining hundreds of longterm, peripheral support jobs while also providing annual state and local tax revenue of, on average,
more than $20 million to benefit schools, roads and other state and local infrastructure projects. And the Nuclear Energy Institute estimates that federal tax payments from each plant amount to approximately $75 million annually. New nuclear plants will also provide a large economic stimulus to the U.S. supply chain through purchases of commodities such as steel, concrete and thousands of electrical components. For example, construction of each new Westinghouse AP1000 nuclear power plant in the United States will require procuring approximately 30,000 cubic yards of concrete, 22,500 tons of rebar, 15,000 metric tons of steel and 300 modules and assemblies. Presently, 22 new nuclear power plants have been announced for the United States, with six under contract and four in the early stages of construction. The Nuclear Energy Institute estimates that private investment in new nuclear power plants has already created an estimated 14,000 to 15,000 American jobs and many of these are at Westinghouse. This recent job creation is just the beginning as the number of new jobs created will likely increase dramatically after 2013 when the first wave of new nuclear plant construction begins in earnest. The local benefits of a nuclear energy plant are significant, particularly when weighed against the overwhelming safety record of the current U.S. fleet of plants and the reliability of the current generation of plant design. Over the past 30 years, more than 100 existing commercial reactors in the United States have continued to operate safely and efficiently without a single incident. As a result, Americans now support the use of nuclear power for electricity generation more than at any point in history. According to a study commissioned by the Nuclear Energy Institute, 70 percent of Americans favor the use of nuclear power, whereas the country was evenly divided on this question just 20 years ago. A nuclear renaissance has arrived and it presents an extraordinary opportunity to help the U.S. economy rebound. We should embrace this historic chance to achieve energy independence and, at the same time, provide the United States with the clean electricity it needs to support robust economic growth well into the future.
Jim Ferland is president of the Americas region of Westinghouse Electric.
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I N T E L L I G E N T U T I L I T Y E N T E R P R I S E : V I S I O N & P R O G R E S S T O D AT E
Sharing experience across the silos

Knowledge Executive Summit expanded its scope in 2010 By Kate Rowland
On the eve Of its fifth year, energy Centrals
Knowledge Executive Summit undertook a transformation not dissimilar to the one the electric utility industry is also undertaking. Recognized as one of the utility industrys most valuable and prestigious forums for chief information officers, the summit this year expanded its scope to include other mission-critical utility executives in customer service and operations. In the process, it also gained a new name: the Knowledge Intelligent Utility Executive Summit. With mounting political and environmental pressure, increasing energy demand and the potential for rising fuel prices, the utility industry is faced with making some costly investment decisions based on desired outcomes that will depend largely on multiple factors. As a result, the intelligent utility of the future means more than intelligent endpoints on the grid. It also means the intelligent integration of the customer with IT and operations. These three areas will have to work as a team to address the serious challenges and opportunities facing the intelligent utility over the next several years and beyond. And so, this year, Energy Central expanded delegate participation to include not only the utility industrys top CIOs, but also their peers in customer service and engineering. The summit offered a unique opportunity for top executives in all three areas to gain new perspective from industry thought leaders, as well as to share their knowledge in roundtable discussions and interactive leadership forums. Here, wed like to share with the rest of the industry a bit of what was discussed throughout the summit. Consumer and regulatory resistance to smart grid One of the first days panels took on the thorny issue of consumer and regulatory resistance to smart grid. Dave Harkness, vice
2 | K n o w l e d g e 2 010 S u p p l e m e n t
from left: verlyn Kroon, Branndon Kelley and steve schmitz.

Photograph by Mark Skalny
president and CIO at Xcel Energy; Dennis Gribble, vice president and CIO, Idaho Power; Michelle Chibba, director of policy for the Information and Privacy Commissioners Office of Ontario; and Thomas Wright, chairman and commissioner of the Kansas Corporation Commission, discussed issues within their own jurisdictions, and answered numerous questions from a packed room. Harkness noted that Boulders SmartGrid City, which has seen recent media coverage regarding costs and a subsequent rate case decision, will yield long-term value, and the project cost half of what it would have without vendor partners. But adding consumer capabilities to the mix may not be what consumers want, Harkness said. When our customers flip on the light switch, it still goes on. At the end of the day, thats what theyre looking for, he said. Our customers arent out there screaming for these capabilities. Theyre going to see the costs and say, whats in it for me? As Idaho Power hasnt yet begun to deploy its planned 500,000 smart meters, there have been no issues as yet, Gribble said. But the longevity of Idahos regulatory commissioners, he said, will help as the rollout begins, because the commissioners understand the efficiencies that the meters will bring. He feels that collaboration and communication throughout the process are both key to a projects success. But theres beginning to be some increased dialogue from customers regarding rate recovery requests. Chibba said privacy is a sleeper issue, and her office has
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undertaken to raise awareness among consumers. While the trend towards data collection and analysis will help utilities with operations and billing, other secondary purposes should require consent of the consumer, she said. Privacy doesnt equal security, Chibba pointed out. Privacy is much greater. Wright, the regulator on the panel, brought welcome news from the other side of the table when he noted: Our role is to balance the concerns of shareholders and ratepayers. We have a long list of energy-related priorities. In the absence of a comprehensive energy policy to coordinate these priorities, were focused on removing obstacles to their enactment, he said, adding that the role of the Kansas Corporation Commission is removing whatever policy obstacles exist, and getting out of [utilities] way. tripartite approach to smart grid Sharing experiences, utility to utility, was a strong focus of the summit. Executives from Toronto Hydros smart grid steering committee generously shared their own experiences about the utilitys implementation of smart meters (which it began in 2007, one of the largest production deployments of smart meters on the continent) and time-of-use (TOU) pricing. Smart metering, for Toronto Hydro, is not a customer choice issue it is our standard, said Ivan Labricciosa, the utilitys vice president of asset management. One of the key thrusts in Toronto Hydros smart grid activity came from the Ontario governments new energy policies calling for smart meters across the province by the end of 2010, along with provincially mandated TOU rates. But smart grid is not just AMI, said Robert Wong, the utilitys vice president of IT. It is all around our core business of managing the grida tripartite approach to smart grid. This also extends to customer service, according to Ben LaPianta, Toronto Hydros vice president of distribution grid management: Within the envelope of smart grid, we are looking at changing our customer service model Smart metering is really an opportunity to change the way we interface with customers. evs enter the mix Utilities are on the spot as electric vehicles (EVs) begin to roll out. Regardless of projections for the uptake of electric vehicles in any particular region, utilities across the country must prepare to communicate with customers, have charging rates to drive nighttime charging and be ready to assess distribution system impacts. A panel of utility and R&D experts addressed what we can expect as the rollout begins. Mark Duvall, the Electric Power Research Institutes director of electric transportation, said unequivocally that there are no technology or economic barriers to EV adoption; its all about
scale. Within 10 years, he said, EVs will have a lower total cost of ownership than internal combustion-driven vehicles, presumably because battery costs will drop, and because charging EVs costs less than one-quarter of the equivalent mileage via gasoline. Southern California Edisons coverage territory is projected to see a relatively high uptake in EVs, and the utility has been proactive in its preparations. Seth Kiner, the utilitys director of customer experience management and marketing, said SoCal Edison used Prius adoption to serve as a proxy to forecast EV adoption. In addition, it has just launched a Web site that brings three important points home to potential buyers to make their buying experience easier: a) determine your charging needs (Level I, II or III, which designates the amps and volts and time-tocharge); b) contact SoCal Edison or use its cost calculator tool to determine your optimal rate; and c) install charging equipment. The utility is working to speed the installation of charging gear at homes by streamlining permits and training installers. Rick Harris, chief technology officer at DTE Energy, discussed distribution system impacts, a topic that resonated with many utility attendees. DTE is offering $2,500 to each of the first 2,500 customers to sign up their EVs, which will help the utility track adoption, as well as assist DTE in assessing distribution system impacts. roundtables on overarching themes While some roundtable sessions during the summit were broken down into CIO, customer service and operations topics, there were also a number of integrated roundtable sessions that involved participants from all three areas. These small sessions encouraged open discussion among peers, with the understanding that their comments would not be publicly attributed. Sessions covered topics such as best practices and standards for cybersecurity, as well as legal issues surrounding cybersecurity and customer data; public versus private opportunities in cloud computing; using new technologies to communicate with customers in new ways, and using social media to communicate inside and outside the utility; developing mobile applications for the customer and for operations; improving IVR and web self-service utilization; teaching the call center to sell; governance and support of operations technology; and operational challenges to an evolving electric system. Often, discussions occurring in one roundtable session carried over, in part, to other roundtables across the summit, a good indication of the peer-to-peer discussions being encouraged across the silos, and a key theme being encouraged within this years expanded conference.
With files from Phil Carson, Christopher Perdue, Rick Nicholson and Jon Brock.
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Facing Unprecedented Change

Chief Information Officers Speak Out By Christopher Perdue
the prOliferatiOn Of advanCed metering
infrastructures being deployed in the utility industry has placed new demands on the information technology areas of utilities. As a result, chief information officers (CIOs) are facing unprecedented change. At the fifth annual Knowledge Intelligent Utility Executive Summit in Scottsdale, EnergyBiz interviewed six CIOs to gauge how their utilities are dealing with the largest reconfiguration of the utility industry in over a century.
ENERGYBIZ As most utilities implement energy solutions such as Web portals, customers will be more observant of hiccups in the technical system. So how are utilities going to manage this change? Nut tall I think this is an underreported thing thats going to matter a lot, and that is, were putting in systems that will not be five nines. Yet we have marketing departments that like to go overboard on it. For example, it is often said that with the smart grid in place we will know when your power is out. We need to be careful with those statements. At any time, one or two percent of the community is going to be communicating, if youre talking about the meters going through. Im really spending a lot of effort internally in understanding that, now that we have hundreds of thousands of meters and thousands of sensors. Were going to be more open to our end user, but theyre also going to see the portal wasnt updated for their house this hour, or this day, or whatever. So a lot of my time in the smart grid actually has been working with the different areas. Often when you talk to the vendors, you hear that everything is going to work wonderfully, and were going to be able to know how to work the technology. When in truth, the technology is going to work sometimes, and not others. And then we will have operational issues, learning how to manage this piece. Well get better through time. So one thing that we
really have to concentrate on is not overpromising. And the second thing is to keep in mind that were just not installing vendor solutions. Its not a case that youre buying software and putting it in, or even the managed services were buying from vendors. You have to control it and learn how to operate it. And then you can move to the fact that its not future-proof, because its IT. Youre going to learn more. And that just amplifies it. You know, for me, IT is no longer about operating the systems in the IT operations. Architecture and process control is so critical in IT, along with a helping of whats expected, whats not, what is the total cost of operation, what is it going to cost you for your life, and what are you going to get for it. Vegas We really have to pause and think about what is it that the technology is going to enable, and what is it that our customers want to use, versus rolling out a lot of technology. And really, what value does it bring to them? How are they going to engage with it? What benefit does it actually bring to them in the context of the service that we provide? And thats what we need to be thoughtful about, is they may not have any interest in seeing reports about how many kilowatt hours were consumed between 9 oclock and 12 oclock. That may not tell them anything that they can use. So we need to think about really, what is it theyre going to do with the information and technology we roll out? Nut tall I agree. And different customers want different things. At our company, our ad campaign now is that were giving you options. We in IT need to have a modular, mostly coupled architecture thats going to make it so you can change your rate plan, and not wait for a vendor to upgrade something. Kelley The question I have is whats going to be the impact from a customer support standpoint? Youre putting this technology in the home, and now all of a sudden, everyone has this technology, and people dont even necessarily want it. And once they start using it, theyre going to want to have this
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technology set-up and training on how to use it. So whos going to be responsible for that? Harris New equipment and greater access to information will affect our customer contact channels, job definitions and work processes. Its more complicated than just having our call center reps ready to answer a new class of questions. Every customer contact point must be ready with a personalized response to inquiries related to new equipment, rates, usage, conservation and even electric vehicles. Judice Thats one thing that were looking at at PNM within our marketing and customer support area. Were already taking a look at the types of higher-level subject matter experts needed to work
from left: Christopher perdue, richard harris, Kevin Judice, dawn roth, reid nuttall, Branndon Kelley and pablo vegas. Photograph by Mark Skalny
The CIOs
Branndon Kelley
Chief information Officer american municipal power
dawn r. roth
general manager of information technology services Colorado springs Utilities
Kevin Judice
vice president and Chief information Officer pnm electric
pablo a. vegas
vice president and Chief information Officer american electric power
reid nuttall
Chief information Officer Oge energy
richard harris
Chief technology Officer dte energy
in our call centers, both on the deregulated side and the regulated side, to be able to field those types of questions and be able to resolve those problems. Now how do you fund it? Well, obviously were looking for fair regulatory treatment to support us in that. But you know, thats one of the things that were very concerned about as these technologies roll out, whether we provided them or not, right? Were trying to figure out how we satisfy the inbound wave of calls and questions that come into our customer support. And we dont have the answer to it yet, but thats something were diligently focused on right now. How can a utility infuse IT in your business? Kelley This is probably both the most important thing we can do as IT leaders, as well as our biggest challenge. Because of project failures (meaning over budget, late in delivery or results not as promised), I have seen IT actually defused from the business. The focus has to be changed from a support arm to an innovative business enabler. Many times I have seen IT departments fail because IT was trying to be a people pleaser. So whatever someone needed, the attitude was, lets run and help them. And two, IT sold projects on cost versus value. So I use this analogy: when you go to build a house, or build an addition on to your house, it costs $10,000. But what you dont think about a lot of times is what its going to cost to maintain that house, that room, for however long you live therelighting, cooling, etc. IT does the same thing. They go
ENERGYBIZ
to the business and say, Weve got this big project thats going to cost, whatever. And a lot of times they dont communicate what its going to cost in the long term. And I said, yes thats very true. But what I see is when you build a room on your house, you think about what you can do with that room. I can put in a pool table, and I can put in a dartboard. My life is going to be so much better. IT should do the same thing. When I present projects to our board of directors, the last thing I ever talk about is what its going to cost. I say, were going to do this, and this is why its going to make our lives better. And guess what? Just like when you build a room on your house, when you go to sell it, this is going to improve your business X number of times. Its going to raise the value of our company X number of times. And you still probably get thrown out of the room, because they dont want to spend the money. But at least you get a captive audience for a period of time, because they can connect with the value that theyre getting, versus the dollars that theyre spending. rotH The other thing I would add to that is, in these tough economic times where were making hard choices with those dollars, IT sometimes can be difficult to understand. So, as Branndon said, putting it in terms of how it will help the utility in finding people inside the business who are going to advocate for the projects that they need, and the projects that you can provide, then they become partners and it becomes even more critical for getting those taken through the process.
Learning lessons and tracking trends

Knowledge Summit examines the intelligent utility By Kate Rowland
While there has been tremendous progress in the area of standards, there is also a lot of work still to be done. Cybersecurity crunching data, dissecting survey research and predicting is still threatened, and we also need to think about future-proofing industry trends. In the final panel of the Knowledge 2010 Intelligent Utility end-state IT architecture, he said. And then theres that elephant Executive Summit, summit co-chairs Christopher Perdue, vice in the living room: customers are not necessarily asking for it. Finally, a new curriculum is required that is fluid across president of Sierra Energy Group, a division of Energy Central; Jon Brock, president of Desert Sky Group; and Rick Nicholson, OT and IT. And, tangentially, we need to be looking at smart vice president of research for IDC Insights, joined Adrian Booth, grids impact on business processes. How much have we really a principal in McKinsey & Company, to discuss the trends they thought about where this business process is going, rather than siloed projects? he asked. see emerging around the intelligent utility. The whole notion of smart grid needs to be spun on value creation, Booth told the summit audience: Why sierra energys Christopher perdue discussed are we doing it? Value creation, $100 billion in value. changing trends in utility operations. There are three types of value propositions, he said. Photograph by Mark Skalny The first is substitute value (the same level of service, but more efficiency). The second is incremental values. Prepaying for electricity is an example of thiscustomers see real value in a new service. The third type of value is anticipated value, or changing the baseline proposition. This requires a very different mindsettalking about problems that dont yet existand building a business case around it.
theres nOthing analysts liKe mOre than
polling questions Prior to the Knowledge summit, members of Intelligent Utilitys online readership audience were asked to answer a series of polling questions in the areas of IT, operations and customer service. During the panel discussion, summit attendees were asked to respond to these same questions via a live, interactive poll. Questions ranged from Does your company have a formal IT strategic plan that prepares the company for current or future smart grid initiatives? to Does your company have a formal governance structure that brings together T&D operations/
In opening, Booth told the audience that weve already learned some lessons along the smart grid path. First, he said, the business case is not clear. There are very few examples of an integrated business case available. Additionally, incentives arent aligned to compensate for the risk profile, and the technology is still considered immature and not well field tested.
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panel sessions and more intimate roundtables dominated the summit. here, moderator rick nicholson discussed consumer and regulatory resistance with dave harkness, dennis gribble, michelle Chibba and thomas Wright. Photograph by Mark Skalny
engineering with information technology (IT)? There were also questions that offered a selection of openended answers, such as Smart Grid should be owned by: a) a dedicated smart grid executive, b) operations, c) customer service, or d) information technology. and The customers in my service territory: a) understand smart grid well; b) understand smart grid moderately; c) do not understand smart grid; or d) have absolutely no clue what the smart grid is. trends revealed In general, the answers culled from the summit audience reflected those in the broader poll conducted before the event. Approximately 50 percent of the companies polled have a formal IT plan for smart grid initiatives. The IT group is usually involved early on in smart grid initiatives within their utilities, and most utility smart grid initiatives are funded by a special smart grid fund that is separate from IT and/or T&D budgets. Rarely, our survey found, are these initiatives funded out of the IT budget (only 1.8 percent of the pre-summit utility audience and 3 percent of the summit utility audience indicated the IT budget covered smart grid initiatives). On the customer service side, the need for increased customer education was highlighted. Only 3.8 percent of the pre-summit audience felt the customers in their service territories understand the smart grid well, while none of the summit audience did. Both polling groups overwhelmingly indicated their
customers do not understand the smart grid. Another trend also crossed both survey groups: when asked how most customers would primarily communicate with the utility in 2020, an overwhelming majority felt it would be via mobile applications on mobile devices, with Web site communication coming next. Very few felt customers would communicate via call centers, e-mail or social networking sites. The utility operations group was asked which types of systems they have in place: DMS only, a combination of SCADA and DMS, SCADA only, a combination of SCADA and EMS, or EMS only. Both the pre-poll group and the summit group came in heavily on a combination of SCADA and EMS, at 46.3 percent and 54 percent, respectively. When asked whether the utilitys operations area had a formal strategic plan that prepares the company for current or future smart grid initiatives, 57.6 percent of the pre-summit group answered positively, while only 36 percent said yes in the summit group. Theres a lot of low-hanging fruit on the operations side, Perdue commented as he compared the results. Finally, both audiences were asked how important it will be for participants utilities to address the issue of an aging infrastructure over the next five years. An overwhelming 72 percent of the summit audience indicated this would be very important, while the pre-summit audience lagged behind at 53 percent. The issues raised in these polling questions will be addressed throughout the coming year, both in Intelligent Utility magazine and Intelligent Utility Daily.
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from left: michael lowe, mahvash yazdi, Ben lapianta, lee Krevat
Knowledge, Innovation, Technology, Excellence

Intelligent Utility KITE and UtiliQ Awards
KnOWledge, innOvatiOn, teChnOlOgy and exCellenCe: these are the CharaCteristiCs
photographs by mark skalny photography
that set leaders apart from the pack. During the Knowledge2010 Intelligent Utility Executive Summit, executives from IT, customer service and operations were recognizedleaders who have moved their companies forward through strategic initiatives, measurable technology efforts, and innovative solutions that have met business results, such as higher efficiency, greater production, measurement and profitability. In addition, we recognized the top three leaders in Intelligent Utility magazines UtiliQ top 25, first announced earlier this year.
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cio of the year

Mahvash Yazdi, senior vice president for information technology and business integration and chief information officer for Southern California Edison, was presented the award for CIO of the Year for her transformational efforts and strong leadership, beginning in 1997, when she joined the utility. Mahvash has been a recognized innovator in the industry for the past decade, said Rick Nicholson, vice president of research, IDC Energy Insights, and Knowledge Summit program chair for IT, in presenting the award to Yazdi. More recently, she has risen to the top of the leadership ranks by shepherding Southern California Edison through a massive ERP system implementation and associated business transformation initiative. She and her team have also been instrumental in enabling the success of her companys smart grid projects, Nicholson said. Yazdi oversees the delivery of business-enabling technologies at Southern California Edison. Since 1997, when she joined the company, Yazdi has transformed its information technology organization into one recognized nationally for 13 consecutive years as one of the 100 Best Places to Work in IT by Computerworld magazine.
customer service at Salt River Project, Michael Lowe has demonstrated unwavering leadership to a customer service team providing service to nearly 934,000 customers in the Phoenix area, said Jon Brock, president of Desert Sky Group and Knowledge Summit program chair for Customer Service, in presenting the award to Lowe. His team has accomplished what most believe to be impossibleproviding pre-pay and dynamic pricing programs to over a third of the customer base using a legacy CIS and billing system. A repeated winner of the JD Power Utility Customer Service award for western states, SRP provides an example for the industry how to provide excellent customer service in a smart grid world, Brock said. Lowe directs major customer programs and initiatives that drive quality and high customer satisfaction. His focus on governance and streamlined business processes drives effective use of technology and efficient use of corporate resources. As a result, SRP is able to get competitive products and services to the market more rapidly and retain valuable intellectual property. Lowe is instrumental in shaping service delivery at SRP as a means to increase competitive advantage. He has delivered a host of services leading to enhanced customer satisfaction and loyalty.
operations leader of the year

Ben LaPianta, vice president of distribution grid management for the Toronto HydroElectric System, was awarded Operations Leader of the Year for his efforts with Toronto Hydros smart grid leadership team, vaulting the utility to the head of the pack in Ontario. Ben and his team have delivered impressive results, said Christopher Perdue, vice president of Sierra Energy Group (a division of Energy Central) and Knowledge Summit program chair for Operations, in presenting the award to LaPianta.
customer service leader of the year

Michael Lowe, customer service executive for Salt River Project, was awarded Customer Service Leader of the Year for his instrumental efforts at SRP in shaping service delivery as a means to increase competitive advantage at the third largest public power agency in the nation. As the head of
Energy information you can act on...

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Ben has led the rollout of both smart meters and time-of-use rates for virtually all Toronto Hydro customers. Additionally, Toronto Hydro was one of the only utilities in Ontario not to have issues reading meters that resulted in billing inaccuracies, Perdue said. LaPianta oversees the monitoring and control of the electric distribution system, emergency response and power restoration, as well as the companys emergency preparedness planning, a position he has held since 2006. With more than 20 years experience, LaPianta brings extensive knowledge in electricity distribution operations, having worked in various managerial roles in the areas of procurement, electric system planning, design and construction, material standards, and investment planning. He spent nine years with Scarborough Public Utility Commission prior to joining Toronto Hydro-Electric System as a result of the amalgamation of Metro Torontos six municipal electric utilities.
The companys award was accepted by Lee Krevat, director of the smart grid initiative for Sempra Energys California regulated utilities, San Diego Gas & Electric (SDG&E) and Southern California Gas Company. Krevat leads enterprisewide smart grid strategy, policy and project alignment. He was recently named one of the top 100 movers and shakers who are influencing the smart grid market. Sempra Energy, based in San Diego, is a Fortune 500 energy services holding company. The Sempra Energy companies 13,600 employees serve about 29 million consumers worldwide.
2010 First runner-up

Austin Energy came close behind the UtiliQ leader, with a combined utility intelligence quotient of 135. The nations ninth largest community-owned electric utility, Austin Energy serves 388,000 customers and a community of 900,000. It is home to one of the nations most comprehensive residential and commercial energy efficiency programs, managing 86,000 smart thermostats in homes and businesses, which at peak times can aggregate to about 90 MW of load. Austin Energys GreenChoice, a utility-sponsored, voluntary green pricing program, currently sits at almost 800 million kilowatt-hours in subscriptions and is still growing. Austin Energys smart grid program covers 440 square miles, includes 500,000 devices, and involves 100 terabytes of data. In addition, the utility owns the nations first and largest green building program.
utiliQ 2010 utility of the year

For the second straight year, Sempra Energys San Diego Gas & Electric leads the pack as the most intelligent utility in America, according to the annual UtiliQ survey of U.S. electric utilities. The UtiliQ ranking is based on a companys performance using five quantifiable intelligence metrics: productivity; renewable energy portfolio; smart initiatives; availability of energy efficiency, demand response and load management programs as well as percent of customers enrolled; and IT investment. We believe that the few companies with IQs over 140 are at near genius level compared with the rest of the industry, and those scoring over 120 exhibit very superior intelligence compared with other U.S. electric utilities. San Diego Gas & Electric topped the rankings at a combined utility intelligence quotient of 142.
utiliQ 2010 second runner-up

PG&E Corporation was neck-in-neck with Austin Energy, with a combined utility intelligence quotient of 134. PG&E first installed meters to measure electricity used by customers in 1912. In the 1970s, the utility began its first energy conservation programs, actively working to help its customers reduce the use of the companys product. PG&E soon became one of the leading utilities in the nation in energy conservation, and remains so today. Today, the company has moved quickly ahead in its efforts to lay the foundation for the smart grid, with its transition to SmartMeter technology. Its goal is to have in place 10 million new electric and gas meters by mid-2012, along with new energy management tools and capabilities, with the goal of improving customer service, increasing reliability, expanding energy efficiency and demand response, and optimizing the use of renewable energy sources and electric vehicles.
Choosing lettuce or bagged salad

Harvard professor Ranjay Gulati talks about creating meaningful value for customers By Kate Rowland
ranjay gulati
ah-ha! mOments COme When yOU least
expect them. For electric utility executives in information technology, customer services and operations attending the Knowledge2010 Intelligent Utility Executive Summit in November, a couple of those moments came courtesy of the summits keynote speaker, Ranjay Gulati, a professor at Harvard Business School and author of Reorganize for Resilience: Putting Customers at the Center of Your Business. An expert on leadership, strategy and organizational issues in firms, Gulatis recent work explores leadership and strategic
2 0 | K n o w l e d g e 2 010 S u p p l e m e n t
challenges for building high-growth organizations in turbulent markets. He offered summit attendees a different approach for looking at their market, and for truly understanding their customers. studying best practices across the board Im not going to lecture you about your business. That would be a wrong thing for me to do, Gulati said. But Im going to talk to you about whats happening in a market context. Why is this idea of being connected with customers suddenly becoming so
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INTELLIGENT UTILITY ENTERPRISE: VISION & PROGRESS TO D TE
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valuable? Why are so many companies and so many industries outside your industry, your sector, talking about this? In the utility industry, its not often you hear a keynote speaker talk about every industry but the electric utility industry. In fact, Gulati shared case studies from the grocery industry, the motorcycle industry and even the engine lubricant industry. Looking at best practices in your own sector is like navel-gazing, trying to get your head down to your belly button. Even if you can get your head down there, there aint much to look at.
So, I think its good to look at best practices outside your sector and see what other sectors are doing, he said. Gulatis research in customer-centricity began in 1999. At the time, I was interested in looking at companies in recessions, he said. One thing I discovered: when markets go down, companies discover this new love for their customers. Suddenly, they profess all this love and affection. I had assumed that every business must be customer-centric to begin with, because if theyre not centered on their customer, what are they centered on? he said. But I came to realizeand it was a rude awakening to methat most businesses, strangely, are not centric on their customer, theyre centric around something else. [It may be] regulation, production, operations, but theyre not centric around their customer. He began to track a dozen companies he felt were really trying to be connected and aligned around their customers, and tracked them over a decade. I discovered that theres something else that has changed in the fundamentals of the markets in which we operate, he said. Today, in the new normal, or the reset economy, theres some fundamental shift in the markets that we need to be aware of that has forced most companies to really think hard about what it means to be connected to your customer. learning to listen In what Gulati described as commodity hell, companies have to find a way to differentiate, and to do that means creating
2 2 | K n o w l e d g e 2 010 S u p p l e m e n t
meaningful value in the eyes of the customer. Otherwise, it simply becomes a mathematical equation where profit = volume x (price - cost). You want to drive both profit and volume up, but at best, cutting cost is only going to stabilize your margin for awhile, he said. And thats where the rubber meets the road, and finding a way to differentiate becomes a valuable commodity. When did you last go to listen to your customer, not sell to them? he asked. First, its important to identify and understand motivators and hygiene factors. As Gulati explained it, the presence of factors which motivate people are described as motivators while hygiene factors are those that arent motivators on their own, but if you dont have them, people are de-motivated. As well, as the market changes, things that used to be motivators yesterday may be hygiene factors today. In the mobile telephony space, coverage used to be a motivator. Now its a hygiene factor, and yet theyre still advertising coverage, he said. We have a hard time letting go of yesterdays motivators. Not understanding the difference between the two can cause companies to make a lot of mistakes, he told the audience. Its important not to over-invest in hygiene factors, but one must also be careful not to under-invest. Bagged salad a must But the key takeaway Gulati offeredan example that was raised continuously in discussions throughout the Knowledge summitwas that of lettuce versus bagged salad. The biggest seller in the grocery industry, he said, is bagged salad, and it wasnt, surprisingly, invented by lettuce growers. Lettuce companies typical market research included questions like, Do you like my lettuce? Gulati said. You need to be asking questions about the customer that have less to do with your product and more about what is going on in the life of your customer. To provide value to your customer, you need to know what their problems are. Customer-centricity is about knowing more about your customers. If you really want to think about customer-centricity, he said, you have to climb over the wall and figure out how to drive value to them. There are so many opportunities for you to connect that you have never dreamed of. Look beyond this lettuce approach to bagged salad. Its not about a technology push. Its not about blindly doing what your customer tells you to do. Its about really being able to understand what is going on in their lives, and how you can help them achieve their goals.
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CFOs WRESTLE WITH DOWNTURN

predictions For 2011

Volume 8 // issue 1 Jan 11 // Feb 11 energybiz.com

people // issues // strategy // technology

TRANSELECTS BIG SPLASH

What you need to knoW about the Future oF energy

T&D FOR A NEW ERA

COAL TAKES A BACK SEAT

An E n E rgy C E ntr Al Pu b li C Ation

4 bring on game change 6

24 Coal Takes a Back Seat

T &D for a New Era

50 Futuregen 2.0 52 boosting nuclear Fuel 53 koreas superconducting highway

34 new approaches to solar deployments

54 power boost, greenhouse gas

36 hawaiis solar challenge

55 trans-elects big splash 56 going deep for Wind

60 pipeline proliferation 62 look back

Visit us at DistribuTECH 2011, Booth 901

OuR TAkE bring On Game Change

How do you design for future smart grids?

Visit or call: www.kema.com/inc 1.800.892.2006

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The world of tomorrow needs

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FiNANCiAL FRONT russias nuclear ambitions

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Defining the Smart Grid.

The Marvelous Marcellus

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business transformation of smart Grid

the widening dePloyment oF smart grids

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So is there a fix for

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