Micro and Macro: What is the Energy Future?

Solar panel on a house roof near Boston
Wikipedia, Gray Watson 

Everybody knows?

Milt Caplan wrote an excellent blog post on the future of energy.   He describes attending an event where

a number of speakers prefaced their comments with statements like “everybody knows the future will be based on distributed generation – primarily with small scale renewables and storage to provide reliability”.  
(Bold in the original)

Is this indeed what everybody knows?  Is there no dissent?

Maybe Microgrids?

As Caplan wrote:

 We have this romantic fantasy that we can live off-grid with a combination of solar power and battery backup.  Of course, with a bit of thought .....we accept that we cannot go it completely alone.  The conclusion being that maybe we need to collaborate with our neighbours and build a small system (or microgrid) to achieve the reliability that we need to power our lives.

As it turns out, I have also been thinking about microgrids. A few days ago,  I heard an excellent talk on smart microgrids by Andy Haun, Chief Technology Officer, Schneider Electric Microgrids Business. These advanced microgrids can be controlled "in parallel" with the grid.  When used in this manner, the smart microgrid systems can avoid costs by shaving peak demand and by using cheaper, off-peak power. The microgrids can be also controlled in an "intentional islanded mode," which is especially useful for storm readiness.

It seemed to me that while these microgrids could be used stand-alone in remote locations, they were mostly going to be used in conjunction with the larger grid.  Or why develop all these "peak shaving" features, and so forth?

It doesn't look to me as if advanced microgrids are going to make the bigger grid obsolete, or at least, not anytime soon.

Maybe Macrogrids? 

Maybe instead of microgrids, we should be looking at really big macro grids?

Many of the renewables advocates who hope for a proliferation of microgrids also hope for long-distance DC lines, to bring bulk power from sunny or windy places to places where more people are living.  Maybe, the answer is long-DC lines to bring energy across the continent, moving energy from sunny and windy areas to big cities.  In other words, really big grids.

Earlier this year, Power Engineering featured an article, Enabling Large Scale Renewables in the Western U.S. This article proposed new, lengthy High Voltage DC lines. These lines had names such as Power from the Prairie, and Centennial West.  The lines seemed primarily designed to move wind energy from the west to the east.  Similarly, in early June, an Wall Street Journal ran an opinion piece titled  Upgrade America's 19th Century Electric Grid.   This article called for a $500 billion dollar infrastructure project to build DC power lines to "transfer energy between power-abundant and power-hungry regions. "

Could this work? Probably not.

Donn Dears wrote a blog post DC Transmission for Cutting CO2 Emissions.  As Dears explains,  HVDC transmission lines are best for moving great quantities of power for long distances; current examples carry hydro power from dams to cities. There are HVDC transmission lines carrying hydro power in the American West (Pacific DC Intertie), and similar lines in China and Brazil.  These lines are fully utilized almost all the time,  because they come from huge hydro systems with more than one power plant.

Such utilization would not be the case for the new DC lines proposed for the US.  They would carry wind and perhaps solar energy, which are not steadily available.  Low utilization rates would lead to higher costs, and DC lines are only cost-effective in limited circumstances to start with. An HVDC build-out would not work.  It would not be cost-effective.

Pursuit of the the Unsuitable

Somehow, in pursuit of renewable energy, microgrids (connected to the main grid) or a huge buildout of continent-spanning DC power lines (connected to the main grid) are considered to be options.  The main grid doesn't go away, but these new features get added.

Now, there are uses for both microgrids and DC lines. Even their proponents, however, are not proposing microgrids and DC lines as a complete substitute for the current grid. At best, they would solve some problems on the grid.  At worst, they would be high-cost, duplicative add-ons to the grid that exists now.

In short, if we want to decarbonize our grid without romantic fantasy and without too much costly duplication,  we need the following:

• Keep our current fleet of nuclear plants running
• Build more nuclear plants
• Build more grid infrastructure, as appropriate.  
• Don't duplicate infrastructure because "microgrid" or "HVDC" sounds cool.  Add them as needed. 

In other words, for a reasonable future, we must pursue suitable technologies. Technologies such as nuclear energy.

ISO-NE Meeting Features Governor Scott: Minor Update

Vermont ISO-NE Meeting on Transmission
Note: this is a screen shot.  The links in the graphic don't work.

Links for registering for the meeting:

Update: Many people were frustrated because the links in the graphic above do not work.  I had working links available, but they were at the bottom of the post.  I am moving them to the top of the post in this update.

Here are links that work.
Woodstock Inn & Resort
CLG Webpage
Register
Mary "Weezie" Nuara

Note: if you have trouble registering,  I suggest you email Weezie Nuara.  Please register in advance because ISO-NE provides a lunch, and they need a headcount.

Now, back to writing about the meeting itself!

Governor Scott will be special guest at ISO-NE meeting in Vermont

The Consumer Liaison Group (CLG) of ISO-NE holds a public meeting every quarter. On September 7, a little less than two weeks from now, the meeting will be in Vermont. (I am on the Coordinating Committee for CLG.)

I hope you can attend. The meeting is free, and includes a lunch. The CLG is the "consumer's voice" for ISO-NE, and this will be a very special meeting.

Governor Scott will speak. He almost certainly will not speak about nuclear power, but I will never forget that he was one of four Vermont senators who voted in favor of continued operation of Vermont Yankee. You can see a short video of his statement at the time of the vote: it's on my blog post Hello Governor Scott, and Goodbye Shumlin.

FERC Order 1000: A public discussion

The main part of this meeting will be a discussion of FERC Order 1000. This order could lead to huge and expensive changes on the grid, and almost nobody knows about it. The basic idea of FERC 1000 is that grid operator (ISO-NE, for example) can order states to pay for transmission lines that are needed for "policy" not just "reliability."

In the past, if a grid operator showed that a new transmission line was needed for grid reliability, the grid operator could spread the payments for that line throughout the states in the grid region. So the line might be only located in one state, but if it was needed for reliability, all the New England states would bear the cost. The grid operator used clear engineering criteria for "the line is needed for reliability."

With FERC 1000, if a transmission line is needed for "policy," the grid operator can also force the states to share the cost of the transmission line. Say that a state has a policy of bringing in wind power from a neighboring state. That state can now commandeer all the states in the grid to pay for the new line. The line is state "policy," after all. Actually, the grid operator would do the commandeering, but the idea is the same.

In Vermont on September 7, many knowledgeable people will be discussing FERC 1000 in public.  This is a rare and important event.

I have more about FERC 1000 in this blog post from earlier this year. That post is somewhat out of date, since New England States Committee on Electricity (NESCOE)  recently lost their FERC 1000 lawsuit against FERC. A representative from NESCOE will speak at the upcoming meeting.

No New Transmission Lines for Vermont! Vermont Government Reacts to Vermont Yankee Closing

Update: Governor Shumlin Reverses Position Again

In mid-June, Governor Shumlin spoke with utility regulators and "tapped the brakes" on the idea of a rapid build-out of gas pipelines and electric transmission lines. According to an article by John Herrick in Vermont Digger, Shumlin said this infrastructure might become obsolete, and new technologies could lessen the need to transmit large amounts of power.

However, in late June, Shumlin reversed his position. On June 20, a panel of energy experts representing the governors of all the New England states met: the meeting was reported by Deborah McDermott of Seacoast Online.  In this meeting, the panelists agreed to ask for a "tariff" (tax) on electricity. The tariff would be used to finance natural gas pipelines and electricity transmission lines.

The state-appointed panelists stepped on the gas for an infrastructure buildout.

As the energy panelists said--something has to give in New England.

It Was Winter 

Once upon a time (earlier this year, actually) a polar vortex came to call in New England.  Sub-zero temperatures  meant that great quantities of natural gas were used for heating homes. Therefore, not enough natural gas was available for gas-fired power plants.  Oil and jet fuel were called into service to provide electricity, and prices on the grid soared. As many news reports noted at the time, there are not enough natural gas pipelines into the Northeast.

Governor Shumlin in January: We need new energy projects

On January 21, all six governors of New England got together as part of the New England States Committee on Electricity to address the pipeline problem.  The governors signed an agreement requesting ISO-NE to support in the development and filing of any tariff changes [fees to users] for two purposes.

In the first purpose, these fees would enable new transmission lines to be built. The lines would bring between 1200 and 3600 MW of low carbon power into the New England electrical systems.  Translation: we will build new power lines to get electricity from Hydro Quebec.

In the second purpose, governors also requested a fee on electricity for the purpose of building new pipeline capacity  to bring natural gas to the area.  The idea is that consumers should pay more for electricity now, in order to build gas pipelines as soon as possible.

Note: Governor Shumlin signed this agreement with these requests.

And Now It's Summer

Meanwhile, the seasons have changed. Peonies bloom, fireflies blink in the twilight, and Vermonters protest energy projects. Pipeline opponents are concerned that an already-planned gas pipeline will carry fracked gas. They also worry about water contamination. They are protesting, chaining themselves to the doors of the gas company, and so forth. One protester was arrested for alleged assault.

Fireflies in Germany

People in Vermont do not like this pipeline. Their reaction doesn't look good for building even more pipelines in Vermont.

But what about transmission lines?  This situation is more confusing because several lines have been proposed. John Herrick of Vermont Digger wrote a comprehensive report in early June: Vermont Smack in the Middle of Crucial Electricity Supply and Demand. As you can see in the report, Vermont seems to be in favor of at least some of these transmission lines, as long as enough goodies are attached. A quote from the Herrick report:

[TDI] wants to bury a 150-mile transmission line under Lake Champlain. TDI, a subsidiary of Blackstone Group, a financial services firm, has lined up private capital for the estimated $1.2 billion project.....TDI says it would also donate tens of millions of dollars to the state for costly Lake Champlain cleanup – or whatever the state decides is best.

Gee, that sounds familiar. "Donate tens of millions of dollars..."

Governor Shumlin in June: Let's Slow Down the Infrastructure Build-Out

As reported by John Herrick in Vermont Digger, Governor Shumlin spoke to utility regulators in early June.  Shumlin "tapped the brakes" on the build-out.  He said that we don't know that "with the evolutions of technology and the local, distributed generation of power...(we may end up) paying for huge stranded costs if we build tons and tons of delivery." Shumlin spoke of the evolution of cell phones. In parallel with cell phones, Shumlin claimed that "new technologies could soon lessen the need to transmit large amounts of power from faraway areas."

Brayton Point

Well, not really. Let's look at the power situation in the Northeast. In Vermont, Vermont Yankee is shutting down.  In Massachusetts, three major coal plants (Salem Harbor, Brayton Point, and Mt. Tom) will close in the next few years, some in the next few months.The grid operator said that Brayton Point was a "must-run" facility. The plant owners answered: "Too bad, we are closing it anyway in 2017."

In short, without "power from faraway areas," the grid around here could get seriously unreliable. We will need transmission lines.

Dumb? Or Smart?

Some of my friends have looked at the Governor's statement and concluded that the man is simply dumb about energy.  He doesn't want power plants, and he doesn't want transmission lines. Yes, this is the man who said that Germany  got 30% of its juice from solar, and that a nuclear plant must be kept running with mostly full staff for years after shutdown.

Shumlin has proven that he is no genius on energy matters.

Governor Shumlin

However, Shumlin is very smart about politics and negotiations.  His recent statements can best be understood as part of a negotiation with anyone who would build any infrastructure in Vermont.  If you build it, you must pay us!

Shumlin has surely noticed that without Vermont Yankee, there will be no easy source for new funds in the Clean Energy Development Fund. I think he has decided to tax the new infrastructure: in other word, tax whatever replaces Vermont Yankee.

When Shumlin makes a speech against the infrastructure development, he becomes better able to get concessions (money) from the infrastructure developers. Shumlin has shown that he can be a formidable enemy to an energy project.  As one person on Facebook wrote: "He's got Vermont Yankee's head on his wall now."  If a project doesn't want him as an enemy, the project owners will probably pay what he wants them to pay.

In my opinion, Shumlin is not dumb. He's smart like a fox.

As a blogger, I plan to have the last word here:

Foxes are smart for themselves.  They are not known for their public-spirited actions.  Ultimately, the ratepayers will bear the costs of Shumlin's way of being-smart.

Questions I Frequently Ask Myself about Vermont Yankee Closure

Well, we have the press release and the FAQs from Entergy.  And we have lots of opinions about Vermont Yankee closing, printed in lots of newspapers.

Here are the questions I ask myself about the closing, and the answers I give myself.

Is Vermont Yankee really closing?

Yes.  They are filing with the NRC to end their license.  This isn't some kind of chess game vis-a-vis the state of Vermont.

Did it have to close?

If Entergy says it has to close, it has to close.  Nobody asked me. Certainly, grid prices were at historic lows in New England last year.  Grid prices feel from an average price of $46 MWh to a price of $36.

From ISO-NE report 

Without underestimating the strain that this implies, I don't think the plant had to close.

Gas Prices and Vermont Yankee

When I look at the Bloomberg article about the plant, Bloomberg says: "The reactor was expected to break even this year, with earnings declining in futures years." Doesn't sound like a crisis to me.  Also, I personally expect higher natural gas prices and higher grid prices in future years, so I think Entergy is betting wrong on this one.  But I don't know the whole story.

I do note that the Entergy stock price barely moved with the announcement (see Bloomberg article above). This means that the stock market isn't expecting a big jump in Entergy profitability from this closure.  It didn't strike me as a plant that needed to close, and the stock market seems to agree with my assessment. If the stock market had thought--wow, they are finally getting rid of that DOG---the Entergy stock price would have jumped.

I hope this is not seen as an attack on Entergy management and their decision, because clearly they have more facts than I do. I don't have all the information they have.

Still,  I have some facts. I definitely have opinions.

So why this announcement right now?

Entergy had to order fuel now for the 2014 refueling. Their forward projections of profitability were negative, and they decided not to refuel in 2014.

Honorably, as soon as they made the decision not to refuel, Entergy informed all and sundry about it.  For most of us (including me) it came as a bolt from the blue, since Entergy had just won their court case, and most of us thought they had every reason to be confident of getting a Certificate of Public Good (CPG)  from the Public Service Board (PSB).

My opinion is that it might have broken the PSB's little heart to give that certificate. (The PSB had so much fun, in my opinion, with holding out to the last minute to grant a CPG for the back-up diesel. The drama!  The grandstanding!) But I thought the PSB would give Vermont Yankee their certificate anyway. As I saw it, the PSB had no legitimate reason to deny a CPG to Vermont Yankee. At least  they had no reason that would stand up in a court of law. So I figured Vermont Yankee would soon be fully approved, CPG in hand.

Therefore Entergy's forward projections of losing money and requirement to close the plant...came as a huge surprise.

So the opponents won?

Not really.  The opponents  didn't win. Entergy was ahead in the confrontation with plant opponents.  The opponents were licked in court, and they knew it.

It's more like the game was called because of rain.

Weren't you just being Pollyanna, Meredith?  Vermont Law School and some rating services were predicting this closure forever.

Yeah, well about those predictions: even a stopped clock is right twice a day.  The plant is still breaking even according to Bloomberg.  I think it was a very tough call for Entergy, not the slam-dunk obvious decision that the opponents claim it was.  And the opponents have been claiming the same thing for years.  According to some of the opponents, solar energy is totally cost-competitive with nuclear.

What happens is what happens, and sometimes it agrees with a prediction, especially if you don't put a time limit on the prediction.

So you expect gas prices to rise, and think Entergy management made a bad call?

Well, sort of.  You know, Entergy listed three reasons they were closing the plant, and I have only talked about the gas price/grid price one.  If that was the overriding reason, yes, I think Entergy made a bad call.

But I don't know enough about the economic consequences of the other reasons.

What were the other reasons?

There were two others reasons listed in Entergy's press release and FAQ:
1) the high cost structure of running a small stand-alone plant,
2) wholesale market design flaws that keep prices artificially low.

So those two were important in the decision, also? Small stand-alone plant and grid market design?  Let's start with the stand-alone plant...

I noted the first reason in a blog post earlier, about the layoffs by the end of the year,  A small plant has higher overhead.  Double-unit plants are intrinsically more cost-effective, which everyone actually knows already. Comparing two Entergy plants, I wrote:

• Vermont Yankee is 620 MW and employs 650 people.
• Indian Point (two units) is 2050 MW and employs 1,100 people (from Wikipedia) 

So it is more expensive, per kWh, to run a smaller plant.  That is part of the issue.

What about that wholesale market design flaw reason?  What does that mean?

I have been working on aspects of this for several weeks.  I'm not quite there yet, but...Here are the three factors I have found so far:

1) ISO-NE is now allowing negative bidding.  

This is a change from the past, when the lowest bid was zero (take our power for free).  Now the lowest bid allowed is minus $150 MWh (take our power, and we will pay you up to 15 cents per kWh to take it). I wrote ISO-NE about this several weeks ago, and called them.  I am still unsatisfied with their answer on this (which was off the record, but very polite).

Here's part of my note to ISO-NE (edited, of course):  

This bulletin

http://isonewswire.com/updates/2013/7/3/iso-ne-and-nepool-propose-more-flexibility-for-energy-supply.html

says that negative bids will now be allowed, up to minus $150 per MWh.  

ISO also says (various planning documents) that one of ISO's goals is to reduce local dependence on natural gas.

My question is the following:

Won't negative pricing availability hurt baseload plants (coal and nuclear) far more than it will hurt natural gas plants? Won't negative pricing end up giving natural gas a competitive advantage?

The answer was that ISO-NE feel that negative pricing will allow power plants to bid in more rationally, and the decision on what plants run will then be purely economic.  However, base load plants will be losing far more money in times of low demand, which undoubtedly factored into Entergy's decision, looking forward.  

Furthermore, it's even worse.  The wind tends to blow at night, and wind energy gets two types of supplements for its power:  One is a 2.2 cents per kWh production tax credit, and the wind farms can also sell their Renewable Energy Certificates (RECs)  for about 6 cents per kWh.  That's 8 cents per kWh, before they get paid a penny for the actual power.

So when the wind comes up on a spring evening, wind can bid into the market at NEGATIVE 8 cents kWh (-$80 MWh) and basically break even.  Other plants, to underbid wind and get their power on the grid, would lose a lot of money.  In other words, the subsidies for wind are now directly aimed at the ability of baseload plants to function.  

There's more wind in the Midwest, and this problem is more prevalent there. The president of Exelon talked about this issue about baseload plants in a speech a year ago.  Sorry, my friends...this post is too long already. Someone else will have to look up his comments.

2) ISO-NE Offers Financial Support for Oil Generation But Not Nuclear

ISO-NE noticed what happened last winter, when a cold snap meant that gas turbines couldn't come on-line to meet demand because they could not get the gas to run the turbines.  ISO-NE needed fuel diversity for the coming winter.  But what fuel?  Well...how about oil?

Yes, it is true. ISO-NE is paying $78 million to oil-fired generators to have oil available if it is needed in the winter.  Read about it yourself in this ISO Newswire: ISO-NE receives sufficient bids for implementing new winter 2013/2014 reliability program; results filed with FERC for final program approval  ISO had a bidding process open to oil-fired generators, dual-fired generators that can switch to oil, and demand response bids. They have accepted bids of nearly 2.3 million MWh, of which about 3 thousand MWh is demand-response and the rest is oil.  They will pay the generators $78 million dollars, the vast majority of which goes to the oil-burners, of course.

ISO-NE isn't paying an extra penny for the reliability that nuclear power gives them all winter.  In other words, all fuels are equal, but some fuels are more equal than others. Some fuels really get rewarded for being available in the winter.

Again, this is new on the grid.

3) Transmission Upgrades to Ensure Grid Reliability Without Vermont Yankee

In many news reports, such as this one in the Burlington Free Press, the Vermont Electric Power Company (VELCO) who manages the transmission system, VELCO, has made statements about how the grid is going to be okay without Vermont Yankee.

Recently, I have found these statements more interesting, or perhaps, more ominous than I would have expected.  Here's the main statement, echoed in many articles, but extracted from the Burlington Free Press article above with emphasis added by the blogger: 

Christopher Dutton, president and chief executive officer of Vermont Electric Power Co. Inc., or VELCO, which manages the state’s electric transmission system, said his organization has been anticipating Vermont Yankee’s closing since 2010.

“From both a transmission grid reliability perspective and from a generation reliability perspective, Vermont Yankee’s closure will not have any adverse effect,” Dutton said.

VELCO and ISO New England, responsible for the wholesale electricity market throughout New England, identified about $30 million of projects that needed to be done to compensate for Vermont Yankee’s closing, Dutton said. He said all of those projects, except for a small upgrade on five miles of transmission lines in the southeast corner of Vermont connecting to Massachusetts, have been completed.

So, of all the gin joints in all...I mean, in all the possible transmission projects that VELCO could have done, they did this one.  For VELCO, getting ready for Vermont Yankee to close took a very high priority.  Interesting.  And this started pretty much when Shumlin began his heavy campaign against Vermont Yankee, and when Green Mountain Power (owned by Gaz Metro, and a strong supporter of Shumlin) began to dominate the VELCO decision-making (VELCO is owned by the various utilities).

At the time the utilities were merging in Vermont, with Green Mountain Power (Gaz Metro) buying Central Vermont Public Service, there was a great deal of concern about Gaz Metro dominating VELCO. There were fears that this dominance would lead to transmission planning that hurt the smaller Vermont utilities (mostly cooperatives). The answer (not much of an answer really) was some kind of citizen-representative on the VELCO board.

At any rate, concerns that VELCO is not-always-above-suspicion are not unique to me.

Look, I know.  All these things are just coincidence.  But who would blame Entergy for thinking maybe the grid and the market weren't being totally fair to them.

So, what's it all mean?

Just on the basis of gas/grid prices, I think Entergy made a bad call.  However, it would take a real utility-analyst to understand the financial implications for Vermont Yankee of negative pricing, $78 million to support oil next winter, a grid that has been designed to not-need Vermont Yankee, etc.

Frankly, it would take more than technical analysis (IMO) to figure out why oil gets supported and nuclear gets the short end of the stick, and the economics of it all.

Conclusion, I don't know what it all means.

Is that all of your FAQs to yourself, Meredith?

Of course not.   But that is it, for now.