Energy Changes at a Turtle's Pace

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Image courtesy of xedos4/FreeDigitalPhotos.net.

When I rejoined the energy world last month, I expected to find that a lot had changed since I last covered the industry 12 years ago. In anticipation of that, I started doing my homework to fill in the blanks. So I was surprised when Rick Bush, editorial director of T&D World, our parent publication, told me, "This industry changes at a turtle's pace."

Of course, customers still flip a light switch and the lights come on just like 12 years ago, but I could not imagine that the technology that makes that happen had not advanced considerably. So, I looked back at a few of the issues that were happening in 2001.

One of the biggest concerns in 2001 (post 9-11) was security of the grid and the energy system. The concern was that terrorists would strike at the electric grid to bring down power and the economy in the United States. But those fears never were realized, but that does not mean that the grid was not without its problems.

The crippling effects of power outages were fresh in the minds of Americans then. Earlier in 2001, rolling blackouts had occurred in California under Gov. Gray Davis' deregulation push. Some utilities were under investigation for possible price gouging. The problems caused some states in the process of deregulation to second guess the wisdom of this move. Adding to the image issues that some utilities faced, energy company Enron was in the news as Kenneth Lay's once-powerful empire fell into Chapter 11.

With deregulation came a greater emphasis on customer service at utilities, as utilities knew they had to differentiate themselves to attract residential, commercial and industrial customers. Coupled with this, utilities were stepping into the world of the Internet and the world of e-commerce. The push was to get more than the five percent of customers paying their utility bills online in 2000 to a higher number, a move that would be a cost-saving measure as well as a customer service measure.

However, the customer service that commercial and industrial customers most wanted was reliable service. The unreliability of the power grid in some places in 2001 caused many commercial and industrial customers to seek options, such as distributed generation, to curb losses they had suffered in the past due to power problems. In fact, 34 percent of businesses in energy-intensive industries had an interest in generating their own electricity, and 34 percent had suffered financial losses because of power problems, according to a survey in 2001 by market research company RKS Research. That same report found that most of the commercial and industrial customers were using more electricity than five years prior. For 75 percent of these commercial and industrial customers, having reliable and steady power was more important to them in 2001 than in the past.

Power generation was a topic of discussion in 2001. Nuclear power had gone through its ups and downs, but in 2001, a few nuclear power plants were being sold even as the storage for nuclear waste was running out at many facilities and the federal government debated the merits of a resolution at a proposed Yucca Mountain repository for nuclear waste. New coal-fired power plants were being built that functioned more cleanly and efficiently.

So, in 2013, what are the issues that commercial and industrial customers as well as utilities are talking about? Twenty-four states deregulated, and then the movement stopped. No state has deregulated in several years, but none of the deregulated states has gone back to re-regulate either.

Commercial and industrial customers are looking at the rising costs of their utilities and how to lower those costs. Of all sectors, industrial businesses use the most energy, consuming around one-third of all energy in the United States, according to the American Council for an Energy-Efficient Economy (ACEEE). Commercial buildings use 19 percent of the energy consumed in the United States. According to RKS Research, many businesses are turning to third-party energy consultants to help them lower their energy costs. Many of those efforts involve being more energy efficient.

Obviously, being more energy efficient is now even more important to commercial and industrial customers. Today, 41 states allow utilities to charge their customers an energy efficiency fee, but 24 of those states offer a self-direct provision (in which the businesses must make their own investments in energy efficiencies in exchange for exemption or a credit) or opt-out provision (with no requirement for energy efficiency investment) for large energy users.

Demand response, which has come and gone over the past 12 years, is again a hot topic, especially for commercial and industrial customers as a measure to curb their costs. Dynamic rates are one offering that some commercial and industrial customers have embraced.

As far as generation goes, many nuclear and fossil plants are now considered old and are being closed, which was not the case in such large numbers 12 years ago. Only one nuclear plant has been built in recent years. That means that gas-fired, wind and solar options need to make up the difference. Wind is relatively cheap to put up and the fuel is free, but just as it was 12 years ago, much of it is being maintained by government subsidies. Solar seems to be moving slowly but mostly in states where it makes sense, such as Arizona and California.

Because these new generation sources are so diverse, the grid has had to become more sophisticated in the past 12 years to accommodate the various sources, which has helped push the smart grid. President Obama's stimulus money put $3.4 billion into the smart grid initiative. And that money is helping to create some change. Transmission is being expanded, and investments are being made in sensors, automated substations and other technology that helps pinpoint, diagnose and sometimes resolve problems remotely.

So, to those people who have been in the industry for 12 years, it may seem that little has changed. However, for me, it seems more has changed than you may realize.

If you were Rip Van Winkle and had just awoken from a 12-year sleep, what changes do you think you would notice when it comes to the energy business on the commercial and industrial customer side as well as the utility side?