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Vol. 157 No.

1 January 2013

Transforming the Grid

2013 Industry Forecast Russian Power Revolution Californias Future: Distributed Generation Hunting Black Swans

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Established 1882 Vol. 157 No. 1

January 2013

ON THE COVER
The Electric Power Research Institute, which contributed the cover story, titles our cover illustration Tomorrows Power System. It depicts the shift from almost exclusively central station generation and one-way power flows to a system in which power users are also sometimes generators, and in which both energy and information flow in two directions. Courtesy: EPRI 2012, All rights reserved

20

COVER STORY: RESEARCH AND DEVELOPMENT


20 Emerging Technologies Enable No Regrets Energy Strategy
The Electric Power Research Institute (EPRI) anticipates unprecedented change in the electricity industry over the next 10 to 20 yearsmore than in the previous 100. To copelet alone thrivethe industry needs to continue innovating and adapting to the changing markets and consumer demands. Heres EPRIs rundown of collaborative research it is engaged in to develop a no-regrets portfolio of technologies that should allow utilities to maintain a reliable, environmentally sound, and reasonably priced electricity supply in the face of uncertainty and enormous upheaval.

30

SPECIAL REPORTS
2013 INDUSTRY FORECAST

30 Slow Growth Aheadwith Unexpected Flares of Activity


The power generation industry is a long-lead-time business with long-lifecycle infrastructure, so any diversion from familiar operating parameters (shale gas, were looking at you) can spell difficulties for generation owners, grid dispatchers, and end users. POWER editors and contributors look at the likely scenariosand surprises ahead for the U.S. and Europe.

40 Coal Battered Early, Later Rebounds


Shale gas development in the U.S. has changed the tune for power generators, leading to a game of musical chairs for coal- and gas-fired power dispatch. Gas may be leading the dance now, but dont count coal out.

44

42 Natural GasFired Plants Continue Rollercoaster Ride


When combined cycle peakers reach peak capacity factors of 80%, you know market fundamentals have changed. There may be more supply now than during the previous gas bubble, but there are still factors that could burst that bubble.

POWER IN RUSSIA

44 The Russian Power Revolution


Russia holds some of the largest fossil fuel reserves in the world and has become a major fuel exporter. Domestically, however, those resources have not guaranteed a reliable electricity infrastructure. We look at the history of the Russian power industry, previous reforms, and the latest plan to modernize a sector hobbled by Sovietera assets and operations. Will $615 billion be enough?

January 2013 POWER

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FEATURES
ASSET MANAGEMENT

50 The Electric Grid: Civilizations Achilles Heel?


Todays electric grid has become too essential to modern life and too vulnerable to human and natural threats. Thats the argument made by several industry experts. Although they may disagree about the most likely threats, and about how to defend against those threats, they agree that if a major grid failure were to occur, the effects would be unprecedented.

FUTURE POWER

53 Distributed Generation: Californias Future

50

Once again, California is serving as energy industry paradigm changer. This time the shift is from central-station generation to increasingly pervasive distributed generationin large part driven by the states renewable energy mandates. How California copes with the associated gear-grinding will be instructive for the rest of the U.S.

DEPARTMENTS
SPEAKING OF POWER

6 My Top 10 Predictions for 2013


GLOBAL MONITOR

8 World Energy Outlook Foresees Distinct Generation Shift 9 Floating Solaron Water 10 THE BIG PICTURE: The Coal Pile

FOCUS ON O&M

14 Safety a Main Theme at Asian Coal Users Meeting 16 Controlling Fugitive Combustible Coal Dust
LEGAL & REGULATORY

18 Calif. Cap-and-Trade: Bull or Bear Market?


By Allison Davis and Kerry Shea, Davis Wright Tremaine

57 NEW PRODUCTS COMMENTARY

64 The Electric Power Industry: A Post-Election Assessment


By H. Sterling Burnett, PhD, senior fellow, National Center for Policy Analysis

Get More POWER on the Web

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Connect with POWER
If you like POWER magazine, follow us online (POWERmagazine) for timely industry news and comments. Become our fan on Facebook Follow us on Twitter Join the LinkedIn POWER magazine Group
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The stories in this issue look ahead to the power industrys future. Online, associated with this issue (on our homepage, www.powermag.com, during the month of January or in our Archives any time), youll find these web exclusives that look back at how we got where we are today:

Navigant Announces Coal-Fired Generation Operational Excellence Awards Grading My 2012 Industry Projections (By Editor-in-Chief Bob Peltier) Too Dumb to Meter, Part 7 (The Atomic Earth-Blaster, Chariot Swings Down to Alaska, and Sedan Side Trip to Nevada chapters from Contributing Editor Kennedy Maize) Russias Power Profile (A detailed supplement to the special report in this issue, by Senior Writer Sonal Patel)

And remember to check our Whats New? segment on the homepage regularly for justposted news stories covering all fuels and technologies.
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POWER January 2013

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EDITORIAL & PRODUCTION


Editor-in-Chief: Dr. Robert Peltier, PE 480-820-7855, editor@powermag.com Managing Editor: Dr. Gail Reitenbach Executive Editor: David Wagman Gas Technology Editor: Thomas Overton, JD Senior Writer: Sonal Patel European Reporter: Charles Butcher Contributing Editors: Mark Axford; David Daniels; Steven F . Greenwald; Jeffrey P . Gray; Jim Hylko; Kennedy Maize; Dick Storm; Dr. Justin Zachary Graphic Designer: Joanne Moran Production Manager: Tony Campana, tcampana@accessintel.com Marketing Director: Jamie Reesby Marketing Manager: Jennifer Brady

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POWER January 2013

WHERE WATER and POWER MEET


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SPEAKING OF POWER

My Top 10 Predictions for 2013


year ago in this column, I predicted that 2012 would be pivotal for the power generation industry, and it was. Coal-fired generation dropped precipitously and gas-fired generation accelerated much faster than industry predictions. Early in 2012 the unthinkable occurred: coal- and gas-fired generation crossed paths at about 32% for a short period of time, although coal subsequently began a slow recovery for the remainder of the year. Our 2013 Industry Forecast (p. 30) discusses the likely price and usage trends to expect this year, which are reflected in many of my 2013 predictions. Looking back over the past years predictions, I graded myself a strong B, slightly down from the past two years (a detailed discussion of my individual scores is available as an online supplement to this issue). Like coal, Im expecting a comeback in 2013.

10. Kyoto 2 is DOA. The Kyoto Protocol expired on Dec. 31, 2012, and an extension (Kyoto 2) was formulated in late 2011 as an interim measure until a new treaty was negotiated, slated for 2015. COP18, which ended on Dec. 7, made no tangible progress. Few nations have backed Kyoto 2, and Russia, Japan, and Canada have rejected the measure unless China and India also accept binding targets. In 2013, China and India wont engage, and the European Union (EU) will stay at arms length until there is agreement for carryover of unused emissions allowances, which the many small member countries disagree with. 9. Coal Combustion Residuals, and Cooling Water Intake Structures Rules Go Live. Why would the administration go into low gear with these two regulations in 2012 and delay post-election into 2013 unless the rules were onerous? Expect coal ash to be reclassified as a special waste and new plants (plus some existing ones) to be forced to begin the move from once-through cooling to cooling towers. 8. Natural Gas Prices Rise. Expect the
6

average price of natural gas used for power generation to rise 20% and the amount of electricity produced by natural gas to drop by at least 10% in 2013, below 2012 levels. 7. Coal Use Rises, But No New Plants Are Built. As gas prices rise, the use of coal for power generation will follow suit, but at a lower rate. Expect coal-fired generation to rise 7% to 8% in 2013, over 2012 levels. Unfortunately, no new coal plants will begin construction in the U.S. in 2013. 6. The EU Embraces Coal. EU member countries will begin construction of several new supercritical coal-fired plants in 2013 in preference to gas-fired combined cycle plants. The price of natural gas imported from Russia into the EU is pegged to the price of oil, making indigenous coal a very attractive fuel, particularly when carbon allowance are at historic lows, and the EU has already reached its 2020 carbon dioxide reduction goals. 5. The EPA Fracks Gas. On the same day the Environmental Protection Agency (EPA) released New Source Performance Standards (NSPS) for the oil and natural gas industry (Aug. 16, 2012), a group of associations petitioned the EPA administrator for reconsideration of certain provisions (now pending). Also, the petitions of eight industry groups challenging the NSPS were combined and filed with the D.C. Circuit Court of Appeals on Oct. 15, 2012. The first hearing is set for Dec. 21, 2012. I predict that the EPA will make small adjustments in the rule to correct the most egregious errors, but the Court of Appeals will strike down the rule for many of the same reasons it did the Cross-State Air Pollution Rule. 4. Demand Stays Flat. The Energy Information Administrations (EIAs) Annual Energy Outlook 2013 Early Release Overview (AEO2013 Overview) predicts that demand for electricity will rise at a rate of 0.9% for 2013. In my opinion, the prospects for an economic stall in early 2013 are very high, thereby quenching the hope of an increase in
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the GDP growth rate. Electricity demand will grow at the more pedestrian rate of 0.7%. 3. Electricity Costs Rise. The average domestic cost of electricity will reach a new milestone of 12 cents/kWh in 2013, an increase of about 2%, according to the EIA. 2. LNG Stays Home. The EIAs December 2012 release of its AEO2013 Overview predicts that a surplus of natural gas will be available for liquefied natural gas (LNG) export by 2016, and the volumes are double those predicted in last years report. With legislators calling on President Obama to declare a moratorium on gas exports and only a single new export terminal approved (Cheniere Energys facility in Sabine Pass, La.) to date, the infrastructure is unlikely to be in place by 2016 to export any significant additional quantities. Other than Cheniere Energy, dont expect approvals for additional export terminals in 2013, which will make the EIA predictions moot. 1. The Carbon Tax Dies. Perhaps the most disturbing concept under discussion by our congressional representatives on both sides of the aisle is the political viability of a carbon tax. Spurring on that discussion was the September 2012 study by the Congressional Research Service that suggested the U.S. budget deficit could be reduced 50% in 10 years if a $20 per metric ton carbon tax were enacted. The tax is represented by some as a way to fight climate change, although many legislators are more interested in the tax as a new revenue source, and others wish to use the revenues to stem the flow of federal budget red ink. Expect plenty of talk but little action, because a tax by any other name is still a tax. I dont expect everyone to agree with each of my predictions. If you have strong feelings, aye or nay, let me know at editor@ powermag.com. Dr. Robert Peltier, PE is POWERs editor-in-chief.
POWER January 2013

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Photo Courtesy of Southern Company

59M112012D

World Energy Outlook Foresees Distinct Generation Shift


Global generating capacity is poised to soar by more than 72%, to 9,340 GW, by 2035 from 5,429 GW in 2011, despite retirement of about 1,980 GW, the International Energy Agency (IEA) forecasts in its World Energy Outlook 2012, released in November. Nearly half of this new capacity growth will be propelled by new natural gas plants and wind farms; new coal and hydro facilities are expected to add about 15% each. An estimated $9.7 trillion will be needed to float new capacity additions, with another $7.2 trillion for new transmission and distribution lines, roughly 40% of which will be needed to replace aging infrastructure. Demand for electricity is set to grow faster than for any other final form of energy worldwide through 2035, ballooning at an average rate of growth of 2.2% per yearat least 38% of which will be driven by China and 13% by Indiabased on the IEAs central New Policies Scenario (which takes into account existing policy commitments and assumes that those recently announced are implemented). By 2030, just 12% of the worlds population will still lack access to power, compared with 19% in 2010. Government Policies to Determine a Future Fuel Mix Gross electricity generation worldwide will, meanwhile, increase by more than 70% from 21,408 TWh in 2010 to almost 36,640 TWh in 2035, the report says. Fossil fuels will continue to dominate the generation fuel mix, led by coal, even though coal generation will see a significant decline in its share of total generation (Figure 1). Shares of natural gas and non-hydro renewables are slated to increase, denoting a broader trend toward more diversity in the fuel mix both in Organisation for Economic Co-operation and Development (OECD) and non-OECD countries. According to the IEA, the projected shift in the types of power generation fuels and technologies will be influenced by several factors, foremost of which will be government policies, which can affect investment in new generating capacity and how existing plants are operated, specifically in the nuclear and renewable sectors. Policies on

nuclear vary considerably across countries: some continue to encourage public and private investment in new capacity, while others ban the use of nuclear energy or have introduced programmes to phase it out, the IEA says. But capital costs will also play an enormous role, as will carbon prices, and water scarcity, which can pose reliability risks for coal-fired and nuclear plants while also influencing the generation mix and generating costs. The Flight of Wind and Solar PV In 2035, the report forecasts, almost two-thirds of the capacity in operation today will still be generating power. Gas- and coalfired plants will make up the bulk of gross capacity additions, but wind capacity will also make its mark. About half of the projected 1,250 GW of gross wind capacity additions will be installed in OECD countries. The fledgling solar photovoltaic (PV) sector will also take off with a global capacity increase that is almost as big as that of hydropower and 2.5 times as large as the net increase in nuclear capacity, the IEA says (Figure 2). It notes, however, that power generated from new solar capacity will be considerably less than the increase in nuclear power generation, reflecting the much lower average availability (capacity factor) of these plants and the variable nature of their output. Some Regions to See Marked Change Certain recent events will distinctly shape future power plans for some countries. In the U.S., for example, the recent shale gas boom and environmental regulations geared toward coal and oil plants have put the nation on track to see a sharp increase in gas-fired generation to replace nearly 110 GW of retired coal capacity by 2035, the report estimates. Japan is still experiencing energy-related aftershocks from the March 2011 Fukushima Daiichi incident, and a September-

2. When one door shuts.

1. Changing states. According to the International Energy Agencys


(IEAs) newly released World Energy Outlook 2012, the share of electricity generation by source and region in the New Policies Scenario shows a marked shift away from coal to natural gasfired generation. Courtesy: World Energy Outlook 2012 OECD/IEA 2012, figure 6.2, page 183 Coal Gas Oil Nuclear Solar PV Other renewables Bioenergy Hydro Wind

About a third of new capacity additions through 2035 will replace retired generating facilities. More than 50% of new capacity additions will be from new gas plants and wind farms, and about 30% will come from coal and hydropower, the International Energy Agency forecasts. Courtesy: World Energy Outlook 2012 OECD/IEA 2012, figure 6.2, page 183 Retirements: 20122025 20262035 Capacity additions: 20122025 20262035 Net capacity change
Coal Gas

OECD

2010 2035

10,850 TWh 13,300 TWh

Oil Nuclear Bioenergy

Non-OECD

2010 2035

10,560 TWh 23,340 TWh

Hydro Wind Solar PV

World

2010 2035 0% 20% 40% 60% 80%

21,140 TWh 36,640TWh 100% Other 600 300 0 300 GW 600 900 1,200 1,500

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POWER January 2013

released Innovative Strategy for Energy and Environment aims to reduce reliance on nuclear power, which had in 2010 provided a quarter of all electricity generated in Japan. But even if no new nuclear plants are built through 2035 beyond the two reactors at Shimane-3 and Ohma that are already at an advanced stage of construction, and existing plants are subjected to shorter lifetimes, nuclear generation could recover a 20% share by 2020 (but could be slashed to 15% by 2035, its share picked up by renewables), the current Outlook suggests. The European Union (EU), which pioneered and continues to be at the forefront of renewable deployment, in 2011 drew away from gas-fired generation (which fell by 17%) and moved toward coal-fired generation (which increased by 11%), driven by higher gas prices and lowered carbon prices in the systemwide Emissions Trading System. The IEA forecasts that trend will continue in the short term even if carbon prices increase over the 20132020 period. The share of coal-fired generation will drop dramatically from 26% in 2010 to just 9% in 2035, the report says, citing higher carbon prices and a greater penetration of renewables. Gas-fired generation will also regain market share in the longer term as the share of nuclear power will decline (from 28% in 2010 to 22% in 2035) as more capacity is retired. One notable trend emerging globally concerns increased urgency to reform competitive electricity markets to buttress against increased price volatility associated with the surge of renewables and ensure that the risks of investing in other capacitysuch as flexible peaking plants, storage, interconnection or demand responseare correctly priced, the report says. With more interconnections established neighboring 3202 MetFab being 4c ad:Layout 1 between 1/19/10 3:28 PM markets Page 1

to uphold system adequacy, electricity markets are becoming increasingly integrated.

Floating Solaron Water


The recent explosive growth of massive solar plants in some of the worlds most remote deserts has stolen some of the spotlight from smaller solar installations that float on water. But in November, a concept proposed by researchers at Norwegian foundation DNV (Det Norske Veritas) for a dynamic floating offshore solar field concept stirred up myriad possibilities, particularly for congested urban regions such as coastal megacities. The so-called SUNdy concept essentially involves a floating hexagonal array that can be grouped together for a power capacity of as much as 2 MW (Figure 3). Multiple islands connected together make up a solar field of 50 MW, DNV said. SUNdy uses thin-film 560-W photovoltaic (PV) solar panels that are flexible and lighter than the traditional rigid glass-based modules, allowing them to undulate with the oceans surface, as Sanjay Kuttan, managing director of the DNV Clean Technology Centre in Singapore, explained. The key to creating an ocean-based structure of this size is the use of a tension-only design. Rather like a spiders web, this dynamic, compliant structure yields to the waves, yet is capable of withstanding considerable external loads acting upon it. According to Dr. Kuttan, separating the solar arrays into prefabricated sections allows for large-scale manufacturing and streamlined assembly offshore. The cable grid provides for maintenance access in the form of floating gangways. Below the surface, the shape of the island is maintained by the tensile forces

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THE BIG PICTURE: The Coal Pile


About 1,199 new coal-fired facilities (as defined by the World Research Institute)a total installed capacity of 1,401 GWwere being proposed globally as of July 2012, spread across 59 countries. China and India account for about 76% of the proposed coal power capacities, and Chinese and Indian companies lead the pack of 483 firms proposing to build the new plants. These are the 10 countries leading the global coal power boom. Sources: World Research Institute, International Energy Agency Copy and artwork by Sonal Patel, Senior Writer

10. GERMANY
12,060 MW (10 plants) #4: 251.15 TWh

10.

9. POLAND 8. UKRAINE
12,086 MW (13 plants) #10: 133.42 TWh

9. 8. 7. 6. 5.

7. U.S.
20,236 MW (36 plants) #2: 1,890.06 TWh

14,000 MW (14 plants) #15: 60.46 TWh

6. S. AFRICA
22,633 MW (8 plants) #6: 232.20 TWh

5. VIETNAM
34,725 MW (30 plants) #34: 14.98 TWh

4. TURKEY
36,719 MW (49 plants) #17: 54.23 TWh

4.

3. RUSSIA
3.
48,000 MW (48 plants) #9: 156.76 TWh

2. INDIA
2.
Key developers: state-owned NTPC (47 plants), state-owned Maharashtra State Power Generation Co. (14 plants), JSW Group (12 plants), Andhra Pradesh Power Generation Corp. (11 plants), Essar Energy (11 plants)

519,396 MW (455 plants) #3: 2,615.46 TWh

1. CHINA
557,938 MW (363 plants) #1: 2,891.66 TWh

1.
Key developers: state-owned Huaneng (66 plants), state-owned Guodian (55 plants), state-owned Datang (43 plants), state-owned Huadian (37 plants), stateowned China Power Investment (31 plants)

KEY Proposed coal plant capacity Global rank of total coal generation in 2009

10

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POWER January 2013

Dust Monitoring: Compliance Now and in the


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3. Rocking solar.

A concept proposed by Norwegian foundation DNV calls for a hexagonal solar panel array that floats on the seas surface. DNV says a collection of these arrays, totaling 4,200 solar panels, could form a solar island the size of a large soccer stadium and be capable of generating 2 MW. Courtesy: DNV

from the lengthy spread mooring. DNV said that the island has also been optimized for solar capability and cabling efficiency. The solar arrays are divided into electrical zones feeding electricity produced into two main switches collecting the power for voltage step up at a central transformer (2 MVA 480/34.5 kV). From the offshore solar farms central island, 30-kV electrical transmission lines connect, tying other islands in

series to form a closed loop and continue to the electrical substation onshore for grid connection, said Kevin Smith, global segment director for DNV KEMAs Renewable Energy Services. The concept of a floating solar array is not new, though only a handful of developers seem to be involved so far. Israeli startup Solaris Synergy in February 2011, for example, installed a modular floating concentrating PV system at the Arava Institute for Environmental Studies Center for Renewable Energy and Energy Conservation north of the Israeli resort town of Eilat that connects to the Israel Electric Corp. grid. Solaris Synergy has also so far signed strategic partnership agreements with Mekorot (the Israeli national water company) and French power company EDF for deployment of their first operational pilot plants of 12 to 15 kW each. The company says it is focusing future efforts on water bodies associated with hydroelectric dams, pumped storage installations, and cooling ponds of electric power plantslocations that typically have existing power grid connections. The company claims that a massive market potential exists for the technology using these industrial water surfaces aloneenough to produce a total of 90 GW of solar power. Other players include French company Sky Earth, which has operated a pilot project in the south of France since February 2011 and is now developing 12-MW and 4-MW projects in that region. Associated drawbacks of floating solar plants have also already been established. Aside from cumbersome maintenance and repair, concerns have been voiced about solar energy concentration levels on a rocking platform. Then there are ecological and cost concerns. Sonal Patel is POWERs senior writer.

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Safety a Main Theme at Asian Coal Users Meeting


Power plant operators, managers, and other professionals from across Southeast Asia met in Hong Kong in early November for the second annual Asian Sub-Bituminous Coal Users Group meeting, created to share information and best practices related to safety, handling, combustion, characteristics, and risk management of the fuel. This years co-hosts were CLP Power and HK Electric. The event was organized by the Powder River Basin Coal Users Group and TradeFair Group, which publishes POWER. Presentations during the two-and-a-half-day event focused on boiler management and coal-handling best practices. Danny S. Lau, engineer I (materials handling), with Hong Kong Electric Co., said a number of benefits come with the use of low calorific value (LCV) coal, which includes subbituminous varieties. He struck a conference theme by saying subbituminous coal also presents a number of problems to users such as increased fire risk, coal spillage and fugitive dust, and generation unit derates. These problems must be mitigated to prevent any catastrophic failure of coal-handling and combustion equipment, he said. At the Lamma Power Station near Hong Kong, where he works, coal yard operations were reengineered and coal-burning equipment was modified to accommodate increased use of LCV coal. Lau said the high moisture content of LCV coal adversely affects both pulverizer performance and the combustion process. As a result, mill inlet temperatures at the power plant were restricted to below 200C to minimize the risk of a mill fire when handling LCV coals. The mill outlet temperature also had to be lowered from 75C to around 60C to 65C. At the Lamma station, in-mill drying is the accepted method of preparing coal for pulverized fuel burning, and Lau reiterated industry standards of achieving a proper dryness in the coal by manipulating primary airflow and temperature. These standards were achieved at the Lamma plant in part by modifying the mills. These modifications included installing a dynamic classifier, which helped improve the fineness of the pulverized fuel; installing a dynamic vane wheel to improve mill airflow; changing the separators to deflectors to minimize the accumulation of residual coal; and installing a mill inerting system to admit steam into the system in case of a fire.

In addition, the mill and the boiler were retuned to handle LCV coals in an effort to obtain optimal operation and system performance. The tuning involved adjusting the mill outlet temperature in accordance with a coal fuel ranking system. Under the system, bituminous coal with a calorific value between 7,800 and 6,380 kcal/kg was classified as A, highcaloric value subbituminous coal of between 6,380 and 5,800 kcal/kg was classified as B, lowcaloric value subbituminous coal of between 5,800 and 4,600 kcal/kg was classified as C, and lowercaloric value subbituminous coal of less than 4,600 kcal/kg was classified as D. (Note that 1 kcal = 3.97 Btu and 1 kg = 2.2 pounds.) Boiler control parameters were adjusted, depending on the classification of the coal being burned. For example, existing boiler control function curves had been set for highcaloric value coal (6,300 kcal/kg), but that practice resulted in an oversupply of combustion air when LCV coal was used. This had the dual effects of reducing boiler efficiency and increasing the coal flow. Lau said that Lamma station operators learned that, based on the tuning results, excess O2 could be trimmed 1% at full load and 0.5% at half load. This adjustment enhanced boiler efficiency and alleviated unit derating when LCV coal was burned. Lau reported several improvements to plant operations as a result of the modifications. First, plant output increased when two types of LCV coal labeled A and B were burned. Following new settings that placed the mill outlet temperature at 70C, excess O2 at 3.2%, and the induced draft fan blade opening at 83%/77%, electrical output using coal A rose some 28.3 MW from a base of 322.4 MW to 350.7 MW. Auxiliary power consumption dropped by 0.31%, and boiler efficiency rose 0.79%. New settings applied to coal B combustion resulted in an increase of 17.3 MW from a base of 348.6 MW, to 365.9 MW. Auxiliary power consumption dropped by 0.74% and boiler efficiency rose 0.53%. The improvement in boiler efficiency was attributed to reduc-

2. Korean coal connection. Sung-Won Ha (right), senior manager with Korea South-East Power Co., answered questions following his presentation at the second annual Asian Sub-Bituminous Coal Users Group conference, which was held in Hong Kong in early November. Source: POWER, David Wagman

1. Asian coal users confab. Delegates to the second annual Asian Sub-Bituminous Coal Users Group meeting in Hong Kong mingle prior to the start of a conference session. The meeting drew power generators from across Asia and North America to discuss the safe, efficient, and economic use of sub-bituminous coal by generating companies. Source: POWER, David Wagman

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POWER January 2013

tion in excess air as well as uplifting of mill inlet temperature, Lau said. The latter would increase the hot primary airflow, thus lowering the flue gas temperature and dry flue gas loss. Sung-Won Ha, senior manager with Korea South-East Power Co. (KOSEP) at its 3,340-MW Yeongheung power plant, said that as the use of subbituminous coal has increased, boiler combustion environments have grown worse. It is very important that power plant companies develop a coal management program for operation and maintenance cost reduction and increased efficiency. He said that for economical coal purchases, three cost factors should be considered: fuel cost, the operational cost for coal supply and flue gas draft systems, and maintenance costs for equipment malfunctions and replacement. Economical coal management means coal selection and mixing to satisfy these three factors, he said. He said that around 40 coals arrived at the Yeongheung station during 2011 from sources that included the United States, Canada, Colombia, Russia, Indonesia, and Australia. A maximum of four different coals may be burned each day with caloric values that range from 3,760 to 6,600 kcal/kg, moisture content that ranges from 6% to 41% and sulfur content that varies between 0.1% and 1.2%. Use of the fuel led to several problems, including pulverized coal deposition on the coal pipe due to condensation, coal feeder outlet clogs also due to moisture, and excessive soot production. Broadly speaking, the plant faced challenges due to the variety of coals, their diverse characteristics, the frequency with which they were changed, and the possibility of receiving coal whose properties violated design parameters. To help mitigate the problems, manage the coal diversity, and help the plant achieve steadily tightening environmental restrictions, an

E-Coal Operation Management System (E-COMS) was devised. E-COMS focuses on coal sampling, coal unloading, coal handling, managing short-term and long-term coal stockpile trends, and coal yard inventory control. The approach considers at least 10 variablessuch as coal rank, coal blending, boiler efficiency, maintenance costs, and auxiliary loadand seeks a balance among optimized coal blending, predictive combustion, and economic value. In order to improve the accuracy for the program, we made use of operation data in real time, Ha said. With this predictive data, coal blending can be made economical and eco-friendly. He said E-COMS will be upgraded continuously so that it becomes even more of a more reliable and user-friendly program as it interfaces with other programs. Richard P. Storm, president of Innovative Combustion Technologies Inc., said the pulverizer mills in a coal-fired power plant condition coal for proper combustion and deliver all of the fuel to the boiler. Because of this, the pulverizers are among the most important group of auxiliary equipment that affect unit reliability, performance, and capacity, as well as the ability to generate power economically. The pulverizers also present a constant risk to safety, which is especially true when firing highmoisture content and highly reactive subbituminous coals. He said these coals are more prone to mill fires and puffs, largely due to the high heat required to dry subbituminous coal prior to combustion. The heat that is required is a product of the temperature and quantity of airflow at the mill inlet. Because subbituminous coal is 15% to 30% moisture, very hot mill inlet temperatures are required to dry the coal and achieve mill outlet temperature. In particular, temperatures can be hot under the yoke, but are quickly reduced once mixed with the coal moisture after passing through the

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throat. The temperature below the yoke is close to many subbituminous coals auto-ignition temperatures, Storm said. As a result, coal spillage into the wind belt under the yoke is a common cause of mill fires. Rejected coal quickly dries and ignites in the high-temperature, oxygen-rich environment. Coal feed interruptions also are a potential source of fires, Storm said. In this case, raw coal supply is interrupted due to imprecise feeder control and stoppages above and below the feeder. With no supply of moist coal, the higher temperatures and airto-fuel ratios present under the yoke migrate upwards into the grinding zone. This is also a risk in the case of mill trips or shutdown. Accumulations of debris or coal anywhere in the pulverizer also will increase the chance of a mill fire because accumulation and settling in the pulverizer components allow coal to dry and may lead to spontaneous ignition. Storm said excessive airflow to the pulverizer provides an abundant source of air to combust ignition sources, including smoldering coal in the classifier, pulverizer, or raw coal under the yoke. Smoldering coal from the bunker reaches a point of deflagration as it travels through the feeder and moves into the mill. Smoldering coal, which has no access to oxygen in the tightly packed bunker, will suddenly be exposed to oxygen as it breaks apart in transit. That, coupled with a decrease in particle size, can compound the danger of a fire. Storm said fundamental precautionary methods to reduce the chance of a pulverizer puff include the following: Ensuring that pulverizer airflow is adequate to facilitate stable transport of coal without settling in the burner but not excessively high to provide an abundant source of air for combustion in the presence of an ignition source. Taking all measures to prevent coal from accumulating or settling in any of the pulverizer components. Ensuring that raw coal to the pulverizer remains uninterrupted and controllable. This can be done through precise feeder control and minimizing stoppages above and below the feeder. Ensuring that no hot smoldering or burning raw fuel is anywhere in the pulverizer system. It is imperative that raw coal spillage into the under bowl area be prevented.

on other concealed surfaces, producing more dust clouds and creating a domino effect that causes further explosions. Preventing Explosions by Using Appropriate Vacuum Cleaners Bill Bobbitt of Bobbitt Associates Environmental Systems, whos been working in the safety field for more than 25 years, said, I always tell my clients, it not a matter of if, but when. Conditions have to be perfect and that when can be 30 years from now, or it could be next week. But if you eliminate the fugitive dust, it cannot create a secondary dust explosion. The National Electrical Code (NEC) defines hazardous locations as those areas where fire or explosion hazards may exist due to flammable gases or vapors, flammable liquids, combustible dust, or ignitable fibers or flyings. Hazardous locations are classified in three ways by the NEC: type, condition, and nature. Class II locations are those areas made hazardous by the presence of combustible dust. Finely pulverized material, suspended in the atmosphere, can cause powerful explosions. The NEC also specifies that hazardous material may exist in several different kinds of conditions, which, for simplicity, can be described as normal conditions (Division 1) and abnormal conditions (Division 2). In the normal condition, the hazard would be expected to be present in everyday production operations or during frequent repair and maintenance activity. When the hazardous material is expected to be confined within closed containers or closed systems and will be present only through accidental rupture, breakage, or unusual faulty operation, the situation would be called abnormal. As the first line of defense in housekeeping routines to prevent catastrophic explosions caused by combustible dust and comply with regulatory agencies, plant personnel need to employ industrial vacuum cleaners that are built from the bottom up to be used in a variety of Class II, Division 2 areas (Figure 4). Redundantly grounded indus-

3. Explosive situation. Primary dust explosions occur when combustible dust such as coal dust is present, forms a dust cloud (in sufficient amounts) in an enclosed environment with an ignition source and oxygen. If any one of these elements is missing, there can be no explosion. Source: National Fire Protection Association
Ignition

For more information on the Asian Sub-bituminous Coal Users Group, visit www.asiansbcusers.org. More information on the Powder River Basin Coal Users Group may be found at www.prbcoals.com. David Wagman is executive editor of POWER.

Dispersion of dust particles

Confinement of dust cloud

Controlling Fugitive Combustible Coal Dust


Regardless of how much prevention is employed to mitigate combustible dust in coal-fired power plants, fugitive coal dust is pervasive and can be dangerous. In coal-fired power plants, mechanical transfer points are leading sources for airborne fugitive dust. However, because coal dust travels quickly over large areas with minimal airflow, fugitive combustible dust settles in many areas. Primary dust explosions occur when combustible dust is present, forms a dust cloud (in sufficient amounts) in an enclosed environment with an ignition source and oxygen (Figure 3). If one were to put a flame to a layer of combustible dust on a desk, the dust would burn, but not explode. Fanning the dust with a piece of paper to make the dust particles airborne, however, would create a dust cloud that could blow up. Catastrophic secondary explosions occur when the force from the primary explosion dislodges fugitive dust that has been allowed to accumulate on walls, floors, and other horizontal surfaces such as equipment ledges, above suspended ceilings, and
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Combustible dust

Oxygen in air

4. Housekeeping helper. Cleaning up the abundant dust around


the boot seals in this cement plant is more effective with the VACU-MAX air-operated industrial vacuum cleaner than with shovels and wheel barrows. Courtesy: VAC-U-MAX

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POWER January 2013

trial vacuum cleaners are designed to shield workers and property from catastrophic secondary coal dust explosions. Perils of Standard Shop-Type Vacuums Any time there is powder flowing in one direction through a plastic vacuum-cleaning hose, it can create a significant static electric charge. In addition, there may be static electricity buildup on individual dust particles. If a charged, ungrounded hose used to vacuum combustible dust were to contact an object that was grounded, the static electricity could then arc and trigger a violent explosion. This is why the U.S. Occupational Safety and Health Administration (OSHA) has issued numerous citations for plant personnel using standard vacuum cleaners where Class II, Division 2 equipment is required under the law. Bobbitt sees a number of standard shoptype vacuums in plants. There are so many problems with them. They themselves are hazards in an industrial environment, he said. First and foremost, they are not grounded or classified for Class II, Division 2 areas. In addition, they can shock workers and

5. Intrinsically safe systems. The VACU-MAX compressed airpowered vacuums meet regulatory requirements for grounding and bonding. Employing this type of industrial vacuum cleaner that is redundantly grounded eliminates the possibility of any kind of explosion from the vacuum. Courtesy: VAC-U-MAX

they clog easily. Not surprisingly, the workers dont want to use them, and if workers dont use them, fugitive dust continues to accumulate in the plant. Recently, Bobbitt discussed challenges with using Class II, Division 2 electric vacuums at a meeting of the Kansas City Power & Light (KCP&L) Coal Handling Group, where safety professionals from each of the KCP&L power stations came together to discuss proactive solutions to safety challenges. He described a recent incident in which he was shown five different expensive Class II, Division 2 electric vacuums sitting in a warehouse at a power plant not being used. Plant personnel told him that they did not want to utilize the equipment because after 20 minutes of use, the filters would bind. In addition, they were reluctant to use them because they continually had to lift the head from the vacuum cleaners and tap the cake off before they could achieve the appropriate suction levels. This same power plant, and its five sister facilities, now use a Class II, Division 2 air-powered VAC-U-MAX model with a pulse-cleaning system on the filters, that with the push of a button releases the dust from the filter and allows the user to resume cleaning, Bobbitt said. The VAC-U-MAX company developed the first air-operated industrial vacuum in 1954 and has been the pioneer in solving vacuum-related challenges in a wide range of manufacturing and industrial settings (Figures 5 and 6).

6. Modularity maximizes usage.


Like the VAC-U-MAX central vacuum system shown in Figure 5 that has an explosion vent, most vacuums are modular in nature. Standard equipment with additional capabilities can be added to the vacuums for specific applications. Courtesy: VAC-U-MAX

Advantages of Redundantly Grounded Industrial Vacuum Cleaners Employing an industrial vacuum cleaner that is redundantly grounded in five different ways eliminates the possibility of any kind of explosion from the vacuum, Bobbitt explained. Although VAC-U-MAX does produce electric vacuums designed for Class II, Division 2 environments, the most economical solution for cleaning combustible fugitive coal dust is the companys air-operated vacuums. This type of vacuum is safer in terms of grounding, and it also works more efficiently in the industrial environment. Beyond the fact that VAC-U-MAX air-operated vacuums use no electricity and have no moving parts, the first of the five ways that these vacuums are grounded begins with the air line that supplies compressed air to the units. Because most plants have compressed air lines made from iron that conduct electricity, the companys air-operated vacuums use static conductive high-pressure compressed air lines. In addition to the static conductive air lines, static conductive hoses, filters, and casters are employed to further reduce risk. Furthermore, a grounding lug and strap that travels from the vacuum head down to the 55-gallon drum is used to eliminate the potential for arcing. Bobbitt added that when you are dealing with explosive dust, you may need a Class II, Division 2 vacuum cleaner in a non-Class II, Division 2 area. You might have small quantities of explosive dust, and it might take a very hot and prolonged source of ignition, but with OSHAs Combustible Dust National Emphasis Program (NEP), facilities need to be very careful that they comply because there are a lot of questions as to what compliance means, he said. Housekeeping violations ranked second in citations under the NEP with respect to combustible dust related hazards, according to recent OSHA statistics. In addition, the agency issued citations for General Duty Clause violations involving the practice of blowing dust with an air compressor and not using electrical equipment that was designed for hazardous (classified) locations. In fact, in the Electric Services Industry Group from October 2010 through September 2011, the General Duty Clause violation category was one of the top 10 violation categories most frequently cited by OSHA. Although the regulations for combustible dust arent real clear, I find that a lot of companies are trying to get better at general housecleaning, Bobbitt said. Contributed by Doan Pendleton (info@ vac-u-max.com), vice president of marketing and sales at VAC-U-MAX.
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January 2013 POWER

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Allison Davis

Kerry Shea

Calif. Cap-and-Trade: Bull or Bear Market?


By Allison Davis and Kerry Shea
GHG emission allowances to business at no cost, and companies exceeding their allowance should be able to purchase GHG emission allowances from other companies. The Chamber concluded that this interpretation of AB 32 would fulfill the states goal of reducing emissions while keeping GHG compliance costs low for businesses and consumers. The Chambers complaint characterizes CARBs allowance auction as both an unconstitutional tax and a violation of AB 32. The complaint alleges that AB 32 only authorized CARB to impose a minor administrative fee but did not authorize CARB to raise revenue by selling GHG emission allowances. Because a two-thirds majority of the California legislature is needed to increase taxes, the Chamber contends that requiring businesses to purchase GHG emission allowances sold by CARB imposes an unconstitutional tax. The Chamber did not seek to enjoin this first auction, but its suit threatens future auctions. CARB must respond to the Chambers allegations prior to the next auction in February 2013. In addition to the Chambers lawsuit, other pending litigation may potentially delay or restrict Californias climate change initiatives:

he California Air Resources Board (CARB) recently kicked off a new era in its cap-and-trade program designed to reduce greenhouse gases (GHG) when it held its first GHG emissions allowance auction on November 14. While CARB pronounced the auction a success, the low price and lukewarm demand for allowances evidences market reticence to fully embrace the program. As a procedural matter, the auction was a success. It had no electronic glitches, and there was no evidence of tampering or interfering with the market. A brief analysis of the results, however, shows that the auction did not generate the enthusiasm that CARB expected.

Wide Participation But at a Low Price As a key part of Californias Global Warming Act, or AB 32, the cap-and-trade program relies on allowances as permission for entities to emit CO2 and other GHGs. The program sets a cap on total emissions that reduces yearly. Emitters must surrender one allowance per metric ton of CO2 (or CO2 equivalent). The program anticipates a secondary market in which emitters and others can buy and sell extra allowances. Those looking to trade in this secondary market will closely watch the allowance price from this and future quarterly auctions. The first auctions results indicate its success may be less than suggested by CARBs press release. First, the sale price for allowances was not as high as anticipated. While all of the available 2013 allowances (23,126,110) were sold, the sales price was $10.09, barely above the $10 minimum reserve price. Many expected the allowances to sell for $12 to $13 each. Second, the auction also included 2015 vintage allowances, of which only about 15% sold at the minimum reserve price of $10. These results indicate that market participants are taking seriously the obligation to obtain allowances but are uncertain of the programs future. The low prices and the minimal number of 2015 allowances purchased may indicate wariness. In essence, participants seem to be dipping their toes in the water, but they are not ready to take the plunge by purchasing large quantities of allowances. Challenges to the Cap-and-Trade Program Market participants cautious responses may be motivated by ongoing uncertainties caused by various court challenges to the cap-and-trade program. Todays prices for 2015 allowances may be inexpensive, but if the courts delay, narrow, or totally reject CARBs cap-and-trade program, todays bargain price could be tomorrows regulatory lemon. Most recently, the California Chamber of Commerce filed suit in state court to enjoin CARB from allocating to itself GHG allowances and then selling them through an auction process to raise revenue. This auction earned the state over $230 million. CARB has reserved for sale approximately 10% of GHG emission allowances. The Chamber asserted that CARB should allocate all
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Environmental groups filed a state suit in 2012 challenging the use of offsets (GHG emissions reductions in certain areas that can be used as allowances) for compliance under the capand-trade program. Environmental groups also filed a complaint last year at the Environmental Protection Agency, asserting that CARBs AB 32 regulatory program violates the federal Civil Rights Act of 1964 by not focusing on emissions reduction from specific local emission sources to the detriment of disadvantaged communities. An appeal is pending before the Ninth Circuit of an injunction issued against CARBs enforcement of the Low Carbon Fuel Standard (LCFS) regulations. So far, the LCFS litigation is the only challenge based on the Interstate Commerce Clause in the U.S. Constitution. The Ninth Circuit has suspended the injunction pending its decision. So although CARBs claimed success of its first auction can be construed as a positive first step in Californias GHG regulation through cap and trade, the auction results suggest reluctance by market participants, who remain unconvinced of its regulatory future. California must battle the lawsuits challenging the use of the auction proceeds, the application of offsets, and the viability of the program as a whole. The participation levels and prices associated with the next auction scheduled for February 2013 will provide more evidence as to market participants confidence that California will proceed with a robust cap-and-trade GHG regulation. Allison Davis (allisondavis@dwt.com) and Kerry Shea (kerryshea@dwt.com) are partners in Davis Wright Tremaines Energy Practice Group.
POWER January 2013

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Emerging Technologies Enable No Regrets Energy Strategy


Achieving a balance between affordable and sustainable electricity while improving reliability is a challenge unlike any the electricity sector has faced since its inception. Technology innovations in key areas such as energy efficiency, smart grid, renewable energy resources, hardened transmission systems, and long-term operation of the existing nuclear and fossil fleets are essential to shaping the future of electricity supplies.
By Arshad Mansoor, EPRI

othing in human history has been more transformative than electricity. Thomas Edison patented the lightbulb in 1879. Just a half-century later, President Franklin Roosevelt declared electricity a necessity, not a luxury. And in 2012, the National Academy of Engineering named electrification the greatest engineering achievement of the 20th century. Since its inception, the electricity sector has developed many innovative technologies to improve affordability, reliability, safety, and environmental sustainability. Over the last six decades, even as the power grid has grown dramatically in size and complexity, the price of electricity has remained relatively flat. The average cost of electricity is roughly the same today as it was in the late 1960s, when adjusted for inflation. And the industry has reduced its overall emissions while increasing fossil generation by more than 160% since 1970. But the industry cannot rest on its laurels today in the face of so much uncertainty and so many challenges. It needs to continue to innovate, to adapt to the changing markets and demands of consumers. At the Electric Power Research Institute (EPRI), we foresee unprecedented change in the industry over the next 10 to 20 yearsmore change than in the previous 100 years. The drivers are familiar to industry observers:

the aggregate fossil fuel share of U.S. total energy use will fall from 83% in 2010 to 77% in 2035, while over the same period generation from renewable sources will grow by 77%, raising their share of total generation from 10% in 2010 to 15% in 2035. Technology challenges to reducing carbon dioxide, mercury, and other emissions. A recent EPRI summary report, Prism 2.0: The Value of Innovation in Environmental Controls, projects the U.S. electricity industry will spend $140 billion to $220 billion for emissions control retrofits, new capacity, and fuel plus operation and maintenance between 2010 and 2035, with more than half of the expenditures occurring by 2020.

focused on a no-regrets portfolio of technologies that would allow utilities to maintain a reliable, environmentally sound, and reasonably priced electricity supply even under the uncertainty of fluctuating natural gas prices, unpredictable electricity supply from grid resources, and potentially increasing environmental regulations (Figure 1). Today, these no regrets technologies fall into three broad categories:

EPRI is collaborating with its members, national labs, universities, and other stakeholders to address all of these challenges and continue to provide the power quality and affordability consumers expect. But the projected costs are high. Thats why EPRI is

Flexible resources and operations. This category includes the ability to cycle potentially all generation assets, including coal, fossil, nuclear, and renewable generation technologies. It also includes energy storage, demand response, and other technologies located on consumer premises. Employing flexible investment strategies for securing all assets, including an array of alternative supply and demand resources, is another piece of this vision. Fuel flexibility is another component, including the ability to mix fuels for some technologies (for example, biomass cofir-

1. Balance dispatchable generation with forecastable demand-side resources. The supply side of todays power system consists of baseload generation plus loadfollowing generation, plus or minus bulk energy storage (left side). All those sources must be continuously balanced to meet customer demand minus interruptible load demand response (right side). The cover photo illustrates a vision of a fully integrated electricity system, where supply and demand are not exclusively on opposite ends of the grid. Source: EPRI

The availability of natural gas and its increasing role in power generation. For some months in 2012, gas for the first time matched or exceeded coal for U.S. power generation. And according to the U.S. Energy Information Administration (EIA) Annual Energy Outlook 2012, natural gasfired plants will account for 60% of U.S. capacity additions between 2011 and 2035. The expanding role of renewable generation. The EIA Outlook projects that
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RESEARCH & DEVELOPMENT


ing with coal) or combine technologies, such as solar and coal. Long-term operations. In the U.S. alone, the industry has an estimated $1.2 trillion invested in assets. As these assets age, significant investment will be required to maintain or replace them and sustain high levels of reliability. The challenge, as it is in the everyday operation and maintenance of assets, is to do the right repair/ upgrade/replacement at the right time. That requires a wealth of data provided and analyzed using new technologies. An interconnected and flexible delivery system. The first energy management system (EMS) was used to balance generation and demand in 1882, when the first of the Pearl Street Station generators was placed in service in New Yorks lower Manhattan. Later, the first Supervisory Control and Data Acquisition (SCADA) systems were deployed in the 1950s and evolved into todays power system, which delivers 3,900 TWh of electricity, generated from approximately 1,000,000 MW of capacity. This electricity is delivered over 2.4 million miles (equivalent to circling Earth 650 times), which includes 200,000 miles of transmission and 2.2 million miles of distribution. Now EPRI is developing what we call Energy Management System 3.0a highly interconnected, complex, and interactive network of power systems, telecommunications, the Internet, and electronic commerce applications that can seamlessly and efficiently accommodate variable generation, demand response, electric vehicles, smart meters, distributed generation from thousands or even millions of nodes, phasor measurement units, and electronic communications. It includes:

Consumer-focused technologies. We are seeing unprecedented changes in the ways consumers access and use information. Smart devices and the new controls they provide to consumers will profoundly impact industry and require fundamental changes in the way we provide services and interact with end users.

Flexible Resources and Operations


New tools now under development are expected to lead to better integration of variable generation. Power system flexibilitythe ability of the system to respond to changes in demand or variable generationis crucial to better integrating significant amounts of variable generation. The system will need to manage increased variability and uncertainty over multiple time scales, from seconds and minutes to hours and days. New resources such as battery storage, compressed air energy storage, or demand response enabled by smart grid technologies will also be important sources of flexibility in regions with high variable generation penetration. Additionally, improved variable generation forecasting, new probabilistic operational planning tools, transmission technologies such as high-voltage direct current (HVDC) and flexible alternating current transmission systems (FACTS), and greater coordination among balancing areas can enable smoother

integration of variable generation by allowing the system to manage variability and uncertainty more efficiently and reliably. EPRI is developing processes, with a focus on tools and long-term algorithms, for considering flexibility in resource expansion. Tools will be provided that allow system planners to consider the flexibility needs of the system with high variable generation. They are being designed to enable better planning decisions to maximize the value of flexible resources on the grid. For example, this could lead to metrics to determine the flexibility needs and resources in a system, considering new and existing resources as well as the transmission network in a system. Changes in demand and increased deployment of renewable generation are forcing coal and combined cycle plants to provide system load-balancing service. Specific operational changes expected for coal and gas plants include two-shifting, high ramp rates, high unit turndown, and reserve shutdown (Figure 2). Guidelines for flexible operations that detail best practices for limiting damage from cycling are under development. Owners and operators of fossil power plants need to consider a range of strategies for managing the increasing need for flexible operation. The biggest challenge to mitigating the impacts of power plant cycling is the lack of available data on the impact

2. Equipment life extension. Cycling the typical combined cycle plant accelerates damage mechanisms such as creep fatigue, thermal fatigue, and corrosion, thereby increasing the rate of component life consumption. This wear and tear increases the overall costs of generation, including direct costs such as fuel, water treatment, and maintenance. EPRI is studying component and operational changes that will reduce the impact of cycling. Source: EPRI

Reduce NOx/CO emissions at low load, install inlet dampers, and isolation/ venting of fuel headers

Smart energy. Smart energy is more than just the smart gridan intelligent distribution system, connected at the consumer level in a way that enables seamless integration of resources. Smart energy also includes big data, sophisticated analytics to interpret and maximize the value of the tremendous volumes of new data. And it includes beneficial electrification, exploring better end uses of energy to improve efficiency beyond kilowatthours saved. Grid resilience. As Superstorm Sandy demonstrated last November, we have to be prepared for the unexpected. Improved resilience includes not only power generation resource and grid hardening but also new/improved recovery and consumer survival technologies.

Accommodate winding thermal growth

Improved drains and attemperator sprays, new alloys for thinner walled headers, improved tubeto-header connections, and better-sealing stack damper

Improved drains and steam bypass systems

Automated startups and improved operator displays and alarm management

Improved casing design to reduce distortion and improved thermal insulation

22

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POWER January 2013

RESEARCH & DEVELOPMENT


of flexible operations on plant equipment, damage mechanisms, costs, and mitigation strategies. An EPRI project is using existing research results of component-level cycling impacts and mitigation, combined with collaborative sharing of lessons learned and strategies used by organizations worldwide, to develop a comprehensive knowledge resource that can guide a successful transition to flexible operation. These Guidelines for Managing Flexible Operations (EPRI document 1023539) are scheduled to be released in DVD format in March and will contain 80-plus EPRI reports plus non-EPRI cycling-related reports. EPRI also is conducting ongoing flexible operations research and development (R&D) focused on:

tions deserve recognition: one for concrete, one for underwater component inspection, and one for transmission line inspection (Figure 3).
Concrete Crawler Allows Real-Time Asset Condition Monitoring. Long-term

Pulverized coal boiler impacts. Improved plant layup practices. Selective catalytic reduction and flue gas desulfurization cycling impacts and mitigation. Designs for increased flexibility in advanced coal plants. Instrumentation and controls to address cycling and turndown. Preventive maintenance for combined cycle plants. Improving power plant operator situational awareness.

An upcoming EPRI report, Plant Operational Flexibility: Emerging Industry Needs and Research Priorities, will document key cycling challenges and R&D needs for the industry.

Long-Term Operations
The use of robotics to improve asset management is a key technology development area for EPRI. Three autonomous robotic applica-

operation of steam-electric power plants and hydropower facilities requires demonstration of the safety and reliability of concrete cooling, containment, and impoundment structures. Manual inspection is costly and time-consuming, and it exposes personnel to potentially hazardous working conditions. Inspection depth and accuracy are constrained by the capabilities of todays portable nondestructive evaluation (NDE) systems. Robots with the ability to climb and navigate irregular, vertical, and curved surfaces of large concrete structures are commercially available. In 2011, EPRI conceptualized a novel application of this technology: as a platform for automated inspection and advanced NDE of major concrete structures at power plants. This concrete crawler employs a commercially available robotic platform to climb the surface of large power industry structures. It applies on-board systems including simultaneous localization and mapping (SLAM) technology and advanced NDE instrumentation developed for concrete applicationsto conduct automated, highprecision inspections and to capture computer-encoded data and images for maintenance decision-making. The concrete crawler will support longterm operation of generating assets by enabling fast, safe, and in-depth inspection of structures such as cooling towers, hydroelectric dams, and nuclear reactor containments. It will obviate the need to use scaffolding or rappelling for routine structural evaluations, eliminating the associated setup challenges, time requirements, costs, and safety hazards.

Its payload of advanced NDE instrumentation will provide unprecedented abilities to examine the interior of concrete structures and locate and characterize voids, rebar corrosion, and other internal defects. Proof-of-concept testing of a concrete crawler with SLAM capabilities is planned for 2012/2013 at a host site. Follow-on enhancements to the navigation system are anticipated, and the crawlers desired NDE functionalities and requisite power supply, data collection and processing, communications, and other capabilities will be defined. A fully functional first-generation prototype will be constructed and evaluated in diverse industry settings during 2014, with further refinements and field tests leading to the development of specifications for a commercial inspection robot.
Submersible Mini-Robot Targets Inspection of Nuclear Reactor Internals.

3. Robotic assistants. The concrete crawler (left) can climb structures and perform nondestructive tests, avoiding the need for a human to be present in a hazardous location or the necessity of erecting costly support structures. The submersible robotic vehicle (right) is being developed to inspect reactor vessels and spent fuel ponds. Courtesy: Climbing Machines; MIT

Remote-operated vehicles developed for marine applications have proven successful for the visual inspection of submerged components in nuclear reactor vessels and spent fuel pools, but commercially available technologies have several key limitations. EPRI is working with researchers at the Massachusetts Institute of Technology (MIT) to create a purpose-built robot delivering a step-change improvement in the nuclear power industrys underwater inspection capabilities. The new robot is being designed to allow safe, reliable, and non-intrusive operation while providing high-fidelity visual inspection across a broad range of components, configurations, and locations. The initial prototype built and tested by MIT features a compact and appendage-free design, a high degree of maneuverability, and wireless operation. Its ovoid form measures about 4 inches by 6 inches, allowing it to nestle comfortably in the palm of a hand. Its innovative propulsion and navigation system applies centrifugal pumps, high-speed valves, and maneuvering jets for precisely controlled motion. The robots shape and umbilical-free operation are critical for successful in-plant applications. Many existing technologies employ propellers, rudders, and other appendages and attachments that limit access to some component locations and preclude certain types of motion. These appendages also may break off during collisions or snag on obstacles, creating the potential for contamination of carefully controlled reactor environments or other operational issues. In prototype testing, the omni-directional robot has demonstrated abilities to navigate through intricate and tight geometries and to conduct inspection-type passes over surfaces. Under joystick control, it can dive and rise,
23

January 2013 POWER

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RESEARCH & DEVELOPMENT


turn in place, and move forward, backward, and sideways. Ongoing technology development focuses on the mini-robots payload and wireless communications system. The payload is expected to include two cameras. The first will support real-time navigation and visual examination by the robot operator; the second will capture higherresolution imaging data for subsequent inspection, nondestructive evaluation, and asset management applications. Optimizing wireless communications for submersed use poses challenges. Water attenuates most frequencies, and systems and components pose complex configurations. A novel system is being explored that combines optical communication capable of high data rates at a distance with radio communication capable of two-way data exchange when line of sight is lost between the mini-robot and its controller. A next-generation prototype is under development, and experimental testing of its improved visual inspection capabilities is scheduled to begin in late 2013. A fully functional mini-robot could be available by 2015 for in-plant demonstration.
Autonomous Transmission Line Inspection Robot. Managing overhead

transmission linesincluding towers, conductors, and insulators, as well as corridorsis a costly and challenging proposition. Utilities must meet increasingly stringent reliability and vegetation management standards, but many circuits are approaching the end of their design lifetimes and are located in remote and rugged environments. Fly-by and ground inspections have limitations, and some equipment is extremely difficult to inspect. The autonomous transmission line inspection robot integrates mobility, sensing, imaging, power harvesting, communications, and other innovations to generate the comprehensive, high-fidelity data required for condition-based maintenance. It is capable of crawling over conductor shield wires and carrying a payload to allow autonomous inspection of transmission corridor segments up to 80 miles long at least twice annually (Figure 4). In 2010, EPRI initiated conceptual development of the transmission line inspection robot, designed to run largely on power harvested from shield wires. Highdefinition cameras and LIDAR (light detection and ranging) sensors will assess component condition, identify trees that could pose a risk to wires, and measure conductor clearance by comparing images taken over time. Electromagnetic interference detectors will identify discharge
24

activity and other indicators of faulty equipment. The robot also will be equipped to collect data as it passes instrumentation deployed on towers and wires, such as EPRI-developed radio-frequency sensors for monitoring vibration, lightning strikes, wind-related damage, and corrosive conditions. Data processing, global positioning, and communications systems will analyze and deliver time- and location-stamped data and images to maintenance personnel. High-risk issues and potential problems that require further investigation or immediate action will be flagged, guiding condition-based intervention. A first-generation technology demonstration platform has been undergoing refinement on a test loop at EPRIs laboratory in Lenox, Mass., and individual subsystems have been advanced in the field and experimental settings. These activitiesconducted in close collaboration with a commercial vendor and member utilitieshave informed design and construction of a next-generation robot offering mobility, energy management, imaging, sensing, data management, analysis, alarming, and communications capabilities. A real-world demonstration on a line segment made robot-ready by a host utility is planned for this year. Field trial experiences will inform full-scale commercial demonstration on a 40-mile-long transmission circuit. The transmission line inspection robot is expected to revolutionize transmission asset management by expanding coverage and delivering actionable information while reducing or eliminating the need for helicopter overflights and ground patrols. On-board systems will collect, analyze, and deliver data to enhance compliance with reliability and vegetation manage-

ment standards and support just-in-time intervention. This technology is expected to improve inspection and monitoring capabilities and worker safety relative to hovering helicopters at cost savings expected to be at least 30%. More importantly, the robot will enable proactive, condition-based maintenance of high-value transmission assets, a smart grid capability supporting long-term operations and leading to significant cost reductions and reliability improvements.

Smart Energy
Residential consumption typically represents a significant portion of peak electric loads, but incorporating major end-use technologies such as space conditioning and water heating in demand-response (DR) programs has proven challenging for a variety of reasons. Consumer inconvenience and cost, the diversity of end uses and utility systems, and the incompatibilities between them are among the most significant barriers to DR participation. Building on years of work to advance interoperability standards across transmission and distribution systems, an EPRI-led initiative launched in 2008 engaged more than 100 product manufacturers, utilities, and other organizations in documenting the need and developing early specifications for a smart grid interface for residential loads. EPRI built the modular DR connector to specification, developed a plug-in communications module with DR capabilities, and integrated them with enduse device controls in coordination with selected manufacturers. Interoperability tests were conducted on space conditioning, water heating, and other modified products, and findings were submitted to the Consumer Electronics Association (CEA) for standardization of a communications interface designed for smart grid integration of residential loads. As a port incorporated in end-use technologies, the modular DR connector is designed to facilitate a plug-and-play approach for direct information exchange and interoperability among utility communications systems and the wide array of consumer devices sold in retail outlets. It could enable low-cost engagement of residential consumers in load management programs across a range of end uses. Manufacturers may be able to add grid-interactive features and the communications port to their product lines without being constrained by compatibility concerns. DR-ready devices will be available off the shelf, enabling consumers to enroll simply by inserting a utility-compliant communiPOWER January 2013

4. High wire act. The inspection robot is capable of crawling over conductor shield wires and carrying a payload to allow autonomous inspection of transmission corridor segments up to 80 miles long at least twice annually. Courtesy: EPRI

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September 9 - 11, 2013


Marriott Wardman Park, Washington, DC

2012 Renewable Energy Projects On-Line*:


- 167 Solar - 92 Wind - 79 Biomass - 9 Water Power - 7 Geothermal
T h e p ro o f i s t h e n u m b e r s - 4 6 % o f n e w e l e c t r i c a l g e n e r a t i n g c a p a c i t y i n t h e U . S . i s f ro m re n e w a b l e s o u rc e s . P l a n n o w t o a t t e n d t h e o n l y a l l - re n e w a b l e s e v e n t R E T E C H .

www. RETECH2013.com
* A s o f O c t o b e r 2 0 1 2 , a c c o rd i n g t o E n e r g y I n f r a s t r u c t u re U p d a t e re p o r t f ro m t h e F e d e r a l E n e r g y R e g u l a t o r y C o m m i s s i o n s O ff i c e o f E n e r g y P ro j e c t s

RESEARCH & DEVELOPMENT


cations module, with no need for an electrician or utility service call. Utilities will be free to develop customized modules or approve third-party products to enjoy both full interoperability with and clear demarcation from customer equipment. Electricity providers are expected to have the real-time ability to manage residential consumption in a cost-effective manner while offering customers intelligent and flexible approaches for moderating energy use in response to price or other signals. The cost of integrating residential loads with the grid with use of the DR connector is anticipated to be as much as 80% to 90% lower than todays approaches. As electric vehicles gain market share, the modular DR connector also represents a key enabling technology for transforming batteries into distributed energy resources. To accelerate adoption of the new standard (CEA-2045), an ongoing EPRI project engages manufacturers, utilities, and their communications technology and load management partners in field deployment and testing of retail products incorporating the modular DR connector. In addition to examining interoperability and efficacy, these studies will address consumer experiences with installing plug-in modules and participating in DR programs.
Common Protocol for Inverters for Grid Integration. In any photovoltaic

(PV) and energy storage systems, inverters convert the DC energy output from the PV module or battery cell into AC energy. In addition, inverters ensure that power quality and safety regulations are followed. However, with the increase of distributed energy resources (DER) on the electric grid, especially on distribution circuits, it is expected that inverters will have a more active role in supporting grid stability. Power electronics incorporated in most inverters are capable of providing reactive power, which can be utilized for voltage regulation and volt-VAR optimization. The voltage fault ride-through capability of inverters allows PV plants to stay online during momentary grid disturbances. Communication-connected inverters, acting on utility commands, can change their operating mode (for example, power factor, active power generation, grid-tied vs. islanded) to match seasonal or load variation needs. Most of the commercial inverters today, especially the larger utility-scale units, can provide smart grid functionality. The challenge is to integrate hundreds of them from different manufacturers, each with proprietary communication protocols, in the same utility network and operate them
26

in a harmonized manner. Ongoing EPRI research is developing common functions and standard communication protocol mapping for smart inverters. Another key challenge is to coordinate the operation of these smart DER resources with existing distribution circuit resources like load-tap changing transformers, line regulators, or capacitor banks to optimize grid performance and reliability. Recently, EPRI, working with the U.S. Department of Energy (DOE) and National Institute of Standards and Technology (NIST), launched a new initiative specifically to address the need for utility enterprise integration of DER. Big Data Challenge. As electric utilities are implementing advanced distribution applications to improve distribution system efficiency, reliability, and performance, a vast amount of data is being generated from sensors, devices, and systems. Utilities are now responsible for data management and analytics to support distribution operations, planning, and asset management For example, going from one meter read per month to hourly reads (720 per month) is a 71,900% increase in kWh data, in addition to potential for volts and VAR data (Figure 5). When standardized analytical methods and tools are developed collaboratively, it helps reduce the total cost to procure, implement, and sustain advanced distribution applications. The development of common analytical methods that can be applied across the utility industry can accelerate the ability to process large data sets and translate them into actionable information for common distribution ap-

plications. EPRIs Distribution Modernization Demonstration is addressing these R&D challenges, identified by more than 1,400 industry and public advisors. The project will employ learning by doing in developing and demonstrating data management and analytics. It will explore new and existing distribution applications that have value to utility members for uses such as early identification of incipient faults, increased accuracy of outage location, and online validation of geographical information system (GIS) maps. It is expected to define the detailed functional requirements for each application, along with the associated data management and integration requirements. And it will demonstrate these applications in a practical approach, preserving legacy systems, as appropriate, while developing an architecture that leverages emerging standards such as the Common Information Model.
Electrification to Enhance Productivity. Businesses are facing intense eco-

nomic pressures to improve productivity, enhance quality, and lower costs to remain competitive. Utilities are seeking to add value for their customers and promote local economic development. And society seeks to curb emissions to improve quality of life while growing jobs and stimulating the economy. Electrification through the application of novel, efficient electrotechnologies can address all of these needs. Electricity offers inherent advantages of controllability, precision, versatility, and efficiency compared to fossil-fueled alternatives in many applications. However, a lack of familiarity and experience with emerging

5. Data explosion. The amount of data collected by utilities will continue to increase as
more advanced technologies are deployed. Fully taking advantage of this new data by turning it into actionable information with industry standard methods and tools is a significant challenge for utility companies. Source: EPRI

Exabytes per year (1 exabyte = 250 million DVDs)

3.5 3.0 2.5 2.0 1.5 1.0 0.5 0.0 1980 1990 2000 2010 2020 2030 Workforce management Transmission sensors Substation automation Smart in-home devices

Building energy management AMI deployment Distribution management

Distribution automation

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POWER January 2013

RESEARCH & DEVELOPMENT


technologies impedes many enterprises, particularly small- to medium-sized businesses and civil institutions, from pursuing electrification measures that improve productivity and efficiency of operations. Utilities also must reconcile electrification strategies with mandated energy efficiency goals that are usually narrowly defined in terms of kilowatt-hour reductions. Moreover, the lack of an analytical framework to quantify the net benefits of electrification strategiesfrom the customer, utility, and societal perspectiveshinders development of utility-business partnerships to facilitate beneficial electrification. A new EPRI project is exploring beneficial electrification by working with the industry; leading industrial collaborative organizations such as the American Iron & Steel Institute, Water Research Foundation, and the Institute of Paper Science and Technology; and with the DOEs Advanced Manufacturing Office and NISTs Advanced Manufacturing Partnership. The project will develop an analytical framework to quantify electrification potential in a given region or service territory, establish a valuation framework to enable business case analysis of electrification programs, and identify the most suitable and highest impact electrification applications for each utilitys unique service territory and customer composition. Special consideration will be afforded to applications ubiquitous to most service territories, including community infrastructure, such water/wastewater treatment plants and transportation ports. Natural disasters are not the only outage threat. Increased use of computers and wireless communications also means heightened concerns about cybersecurityan added complication in the resiliency equation. Distribution systems may be particularly vulnerable to cyber attack with the increased role of automation, as automation is one of the strategies to reduce the impact of outages resulting from other causes. As storms and cybersecurity threats increase, so do customers expectations of service reliability with the evolution of the 24/7, digitally connected society. Even with enhanced response and heroic efforts by crews, restoration that stretches to days, and in some cases weeks, is no longer acceptable. At the same time, consumers expect electricity to be affordable. EPRI and electricity sector stakeholders are developing innovative technologies to address these challenges and make the distribution system more resilient to storms

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Grid Resilience
EPRI is developing innovative technologies to enable grid damage prevention, recovery, and customer survivability during and after major emergencies. On average, U.S. electricity consumers can expect to lose power for more than 100 minutes annually due to outages from major storms. The majority of outages result from damage to the millions of miles of distribution lines. According to a 2008 Edison Electric Institute Reliability Report, 67% of electrical outage minutes were weather-related, typically due to wind, ice, or snow either directly affecting distribution assets or bringing vegetation into contact with utility lines, poles, and transformers. And restoring service after storms can be costly. A survey of 14 U.S. electric utilities identified 81 major storms between 1994 and 2004, costing those utilities more than $2.7 billion. These direct costs represent only a fraction of a regions wider economic losses resulting from extended outages.
January 2013 POWER

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RESEARCH & DEVELOPMENT


and terrorist attacks. Its a multi-pronged approach: prevention, recovery, and survivability. Damage prevention refers to the application of engineering designs and advanced technologies that harden the distribution system to limit damage. System recovery refers to the use of tools and techniques to quickly restore service to as many affected customers as practical. Survivability refers to the use of innovative technologies to aid consumers, communities, and institutions in continuing some level of normal function without complete access to the grid.
Prevention: Hydrophobic Coatings.

tion of these new technologies. It also seeks to gain experience and identify appropriate test methods that can be used to evaluate and specify nanocoatings for use on electrical insulators and conductors.
Recovery: Airborne Damage Assessment. EPRI recently completed pre-

New advances in material science have resulted in the development of a family of nanostructured polymer coatings that can be engineered to provide surfaces with specific desirable properties. These so-called nanocoatings have found application in the aerospace industry to keep surfaces ice free and in architecture to provide self-cleaning properties for windows. Nanocoatings can provide scratch, corrosion, and chemical resistance, as well as super hydrophobicity. The self-cleaning and super hydrophobicity properties are particularly attractive for application on insulators in contaminated environments, and coatings with icerepelling qualities may reduce the risk for flashovers in winter storms. Ice-repelling coatings also may have applications in conductors in areas where there is a risk for mechanical overload due to ice accretion in winter months. An EPRI project is working to develop performance requirements and potential degradation modes and determine if there are any fatal flaws that may prevent the applica-

liminary tests showing that both small piloted aircraft and unmanned aerial vehicles (UAV) or drones equipped with highresolution cameras, global positioning systems (GPS), and sensors can be valuable tools for damage assessment. UAVs equipped with EPRIs Airborne Damage Assessment Module (ADAM) can be small and light enough to be handled by a technician and can quickly survey devastated areas that are difficult to reach by roads blocked by downed trees or other obstacles. The use of ADAM-equipped aircraft could substantially reduce costs and cut response time by hours, if not days. It could also aid in assessing system conditions in normal situations. EPRI research will also assess the accuracy of the sensors and cameras to determine if it is sufficient to assess equipment such as insulators. EPRI is working with utilities to conduct test flights with manned and unmanned aircraft to clarify how the module should be configured and deployed to handle different terrains and weather conditions as well as meet other requirements. This project will also look at different cost models to determine the level of value for investment in ADAM and aircraft.
Survivability: Using PEVs as a Power Source. Plug-in electric vehicles (PEVs),

as a gasoline-fueled generator to provide additional standby power. Automakers are interested in the concept, but the technologies require further development. Nissan Motor Co., Ltd. recently unveiled a system that enables the Nissan Leaf to connect with a residential distribution panel to supply residences with electricity from its lithium-ion batteries. The batteries can provide up to 24 kWh of electricity, sufficient to power a households critical needs for up to two days. EPRI is investigating potential uses for both gas-powered and electric automobiles as a power resource during extended outages (Figure 6).
New Materials for Safer Nuclear Fuel. Improved grid resilience includes

both all-electric and hybrid, could be used to supply energy to a home during an outage. Hybrid electric vehicles also could operate

6. Rolling electricity storage. EPRI is investigating how plug-in electric vehicles may be
used to supply electricity during a system outage or emergency. This graphic shows the evolution of battery storage technologies. Source: EPRI 2,000 ~2,000 Wh/kg Li-air

innovations in power generation. The 2011 accident at the Fukushima Daiichi nuclear plant in Japan illustrated the operational and safety challenges associated with a loss of cooling capability, which can lead to a nuclear fuel meltdown. Current light water reactor fuel designs and materials have limitations that constrain their ability to maintain integrity under accident conditions. EPRI is investigating a variety of alternative fuel design concepts aimed at making fuel safer and increasing operational flexibility and reliability. While complete mitigation of fuel degradation in a severe accident may not be possible, improved materials that can withstand higher temperatures in these scenarios could give operators more time to act before significant damage occurs. Existing light water reactors rely on zirconium-based alloys for fuel cladding and channel materials. These alloys perform well under normal operating conditions, but when the temperature spikes during a loss-of-coolant accident, they can weaken, corrode, and generate hydrogen. The hydrogen buildup can reach combustible levels, where an explosion is possible, which is what happened at the Fukushima plant. The technologies EPRI has examined include: Cladding made from refractory metals, such as molybdenum and niobium Cladding and fuel channels made from silicon carbide Cladding made from iron-chromiumaluminum Fully ceramic micro-encapsulated fuel pellets

400

Lithium ion w/ Si nanowire 400 Lithium ion 110140 Nickel-metal hydride 5075 Now

Energy density (Wh/kg)

100

50 Lead-acid 2545 0 1860 1910 Nickel-iron 3040

Nickel-cadmium 3560

1960

2010

2020

2030

To date, EPRI has focused most of its efforts on molybdenum cladding and silicon carbide channels. Molybdenum alloys have a higher melting temperature than zirconium-based alloys, so they retain their
POWER January 2013

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RESEARCH & DEVELOPMENT


7. Want to get closer to utility customers? There are apps for that, and the industry
is using them. In a survey of 24 major utilities, 67% said that the company is currently deploying and using mobile devices in its T&D operations, but often in different ways. Source: EPRI Not implementing & not planning to 100 90 80 70 Planning to in the future Implementing now

60 50 40 30 20 10 0 Inspection & Work order assessment management Workforce deployment Switching orders Surveying Vegetation management Training

Aggregate results: distribution, substations, transmission

shape even at high temperatures. Molybdenum also exhibits high wear resistance, high dimensional stability, low thermal expansion, and high thermal conductivity. The metal is chemically stable up to 2,000 degrees Celsius. EPRI research suggests a duplex or triplex fabrication approach to make the cladding compatible with current light water reactor coolants. Duplex cladding would have a thin layer of zirconium or other alloy on the outside of the molybdenum tube, while triplex cladding would have thin layers on both the inside and outside. Such fabrication techniques are challenging, but the industry already has experience fabricating duplex and triplex zirconium cladding. As a ceramic material, silicon carbide has favorable high-temperature characteristics as a potential cladding material, but it also faces significant technical obstacles, such as fabrication. A more feasible goal may involve the use of silicon carbide to fabricate channels, the enclosures found between each fuel assembly in boiling water reactors. In 2008, EPRI began investigating the use of silicon carbide as a replacement for zirconium alloys to prevent channel deformation, a problem called bowing. By replacing zirconium in the channels with silicon carbide, less hydrogen would be produced in an accident, thereby increasing safety. Channels represent about 40% of the zirconium mass in a boiling water reactor core. EPRI has developed silicon carbide channels and has begun testing their viability. Implementing nuclear fuel cladding at commercial nuclear power plants will require an extensive testing and evaluation program involving the fuel vendors, nucleJanuary 2013 POWER

ar plant owners, research entities such as EPRI and the DOE, and other international organizations such as the International Atomic Energy Agency and the Nuclear Energy Agency. Given the resource commitment required and high-risk nature of this research, no single entity or group can succeed alone. Collaboration will be critical in conducting the necessary laboratory and field testing, and in assessing whether these new technologies are commercially viable.

Leveraging Consumer Technologies


Consumers are using smart devices primarily phones and tabletsin ways that are profoundly impacting society and the electric industry. Consider the smart phone, which was introduced in 2007. In 2011, manufacturers shipped 500 million of them. Apple introduced the iPad in April 2011 and built more than 100 million of them last year. This profusion of devices has fueled an explosion in the development of applications and uses. In 2007, a little-known network called Twitter carried 340 tweets a day. By 2012, the volume had increased a million-fold, and many of Twitters users also were among the 900 million active Facebook users. On an average day, more than 200 billion e-mails are sent worldwide. EPRI is developing a variety of apps, primarily for utility staff, that enable use of smart devices for tasks that include operating valves, navigating robots, providing field force data visualization for utility engineering and operations professionals, finding and analyzing stray voltage, analyzing power quality, and finding the locations of electric vehicle charging stations.
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The data visualization technology combines tablet and smart phone technologies, real-time data from the internal magnetometer, and 3-axis gyroscopic to stabilize and provide a more accurate compass when a user points the mobile device at a distribution pole or at transmission and distribution conductors. GPS and Common Information Model messages serve to locate and retrieve segmented GIS data from a utility GIS database, and the device renders the GIS data segments on screen as a map information overlay from the camera image. An example of this would be seeing a pole structure symbol through the camera while the screen displays the camera image with the one-line circuit drawing overlaid. EPRIs iCV Analyzer Application is a contact voltage detector app that is used in concert with a commercially available probe (antenna) and amplifier (wand) that allows users to identify metal objects that may have become inadvertently energized. The iCV Analyzer app can be downloaded from iTunes. There is now interest from commercial manufacturers to manufacture and sell the add-on wand device for contact voltage detection. E-mailing datasets, user site info, and GPS location features are included capabilities of this app. Utility companies are finding more and more ways to enhance their points of contact with consumers. Of the companies responding to a recent buildnetwork .com survey, 40% said smart devices have changed how they communicate/connect with their customers, and 24% said they have impacted their products and services and how they are delivered. EPRI recently surveyed a number of its utility members to find out how they are using mobile platforms, both internally to support transmission and distribution (T&D) operations and to provide services to end-use customers. Of the 24 companies that had responded as of this writing, twothirds currently are using mobile devices for utility operations (not including mobile terminals used by utility crews). The main uses are inspection and assessment, followed by work order management and workforce deployment (Figure 7). On the consumer side, 63% of the responding utilities are sending text messages to customers and 38% are connecting via downloadable apps. For both T&D and consumer purposes, cyber security concerns and support costs were listed among the top barriers.

Percentage

Arshad Mansoor is senior vice president, research & development for the Electric Power Research Institute.
29

2013 INDUSTRY FORECAST

Slow Growth Aheadwith Unexpected Flares of Activity

North American shale gas was supposed to realign the generation fleet here and abroad (thanks to anticipated exports) far into the future. Turns out, thats not exactly how the near term is shaping up. Despite stagnant (and even putrid) economies and legislative bodies in the U.S. and EU, there promises to be sufficient market volatility to keep everyone alert.
By Dr. Robert Peltier, PE; David Wagman; Thomas W. Overton, JD; Kennedy Maize; and Charles Butcher
Courtesy: Tennessee Valley Authority

he prospects for the U.S. power generating industry in 2013 arent exciting, but they are intriguing. Though familiar challenges remaineconomic pain, regulatory rumbles, and legislative inactionthe natural gas and coal markets continue to defy year-ahead predictions, forcing everyone from generators to dispatchers to fuel suppliers to rethink their assumptions with now-predictable regularity. Before looking ahead to 2013, consider what has set the stage for the new year. Reading between the lines of the U.S. Energy Information Administrations (EIAs) Annual Energy Review 2012, there is much good news thoroughly mixed with much unmentioned bad news. Consider the following energy milestones that should be cause for celebration: The most hydroelectric power produced (in 2011) since 1999 (up 25% from a relatively dry 20072010).

The most renewable energy (wind, solar, geothermal, and biomass) ever produced. The most natural gas produced in history. Dramatic increases from state and private lands made 2010 the year with the lowest volume of natural gas imports since 1992, principally due to hydraulic fracturing. The trend continued in 2012. U.S. CO2 emissions are expected to stay below 2005 levels through 2035, principally due to coal-to-gas fuel switching and a moribund economy. The low price of natural gas has also moderated or flattened electricity price increases in many parts of the country. A federal court determined that the Environmental Protection Agencys (EPAs) Cross State Air Pollution Rule (CSAPR) did not comply with the Clean Air Act. An EPA appeal is expected.
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The often-overlooked industry lowlightsas we categorize themare equally profound:

The only new hydroelectric projects permitted were upgrades of existing plants and minuscule hydrokinetic and run-ofriver projects. The last major hydroelectric plant built in the U.S. was almost 40 years ago, and none are planned for the future. In fact, many activist organizations are actively campaigning for removal of existing hydroelectric dams. The cost of renewable energy mandates was the primary cause of a 2.3% increase in the national average cost of residential electricity. The lowest amount of natural gas since 1993 was produced from public lands. The EPA is proposing additional gas well fracking rules that are predicted to drive
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up the production cost of natural gas. New offshore gas leases were suspended in early 2009 and have yet to be reinstated. The Sierra Club has announced a plan it calls Beyond Natural Gas. With its unveiling came the statement, Were going to be preventing new gas plants from being built wherever we can. Unmentioned in that press release was the groups longheld view that natural gas is a bridge fuel; now it is vilified as a barrier to the groups goal of an economy devoid of fossil fuels. The EPAs greenhouse gas rule complies with the Clean Air Act, according to the same federal court that struck down CSAPR. Industry appeals are pending. recession early in 2013, so its hard to imagine a quick economic rebound during the New Year. More likely, the November election results cemented another four-year energy policy vacuum, precisely what natural gas developers and federal regulators dream aboutin chaos there is opportunity. All the while, a divided Congress is content to sit on the sidelines as mere spectator to the melee, abdicating its legislative responsibility for determining energy policy. stronger than political posturing and policy. Thats particularly true in the short run. The International Monetary Fund (IMF), which has a pretty good forecasting record, predicts that 2013 will see the U.S. economy grow by a modest 2.1%. The IMF says Japans economy should grow by an even lesssparkling 1.2%. Says IMF Chief Economist Olivier Blanchard, In advanced economies, growth is now too low to make a substantial dent in unemployment, and in major emerging markets, growth, which had been strong earlier, has also decreased. If the U.S. economy continues its current grinding path upward, rather than soaring as the politicians promised, the results for the power business are likely to be more of the same: low demand growth, little new construction, and reliance on strategies built around hedging against the future and playing it safe. Thats largely the scenario portrayed in the EIAs Annual Energy Outlook 2012, released last summer, projecting energy demand growth from 2012 to 2035. Overall, says the EIA, U.S. energy consumption grows at an average annual rate of 0.3 percent from 2010 through 2035 in the AEO2012 Reference case. The U.S. does not return to the levels of energy demand growth experienced in the 20 years prior to the 20082009 recession, because of more moderate projected economic growth and population growth, coupled with increasing levels of energy efficiency and rising energy prices (Figure 2).

Has Washington Become Tokyo?


Early in the 1990s, the booming economy in the Land of the Rising Sunthe envy of the rest of the world throughout the 1980swent bust. Built on a real estate bubble and government management of manufacturing and exports, Japans economic balloon quickly deflated and was followed by years of flat or anemic growth and entrenched unemployment. The worlds third-largest economy had an aging and dispirited population. After 20 years of economic doldrums, Japans economy has still not fully recovered. Some experts, looking at the performance of the U.S. economy over the past four years, fear that the Japanese disease may have infected the U.S., although the consensus is that the U.S. has tools and talents to avoid the worst of the Japanese economic malady. How the U.S. economy in 2013 either deals with or avoids the doldrums has important implications for the way the nation uses electricity in the coming year (Figure 1). Much of the rhetoric in recent U.S. national elections, including the one just passed, hinged on competing claims of which candidate and which party could energize the economy. But history seems to demonstrate that fundamental economic forces are far

The contrasting successes and failures amply illustrate there is no safe, middle ground when it comes to selecting the technologies for producing electricity. The middle ground has become the equivalent of an energy policy no mans land, where Congress steps lightly, if at all. The nations patchwork energy policy has devolved into what is in practice a winner takes all contest between regulators and fuel developers, rather than a consensus strategy that guides development. The imperfect Energy Policy Act of 2005 (remember Corridors of National Interest, and when regulating natural gas wells was delegated to individual states?) would be impossible to pass today because it represented compromise. Despite the policy vacuum, developers of new gas fields have, through private investment, produced enormous quantities of low-priced natural gas thats now available from private and state lands. Siding with them are proponents of an energy independence scenario in which fossil fuels figure prominently. We learned the valuable lesson that fossil fuels are finite, but in terms of centuries not years. On the opposing side is the administration, often supported by environmental activist organizations, which has shown little support for expansion of the natural gas industry or domestic coal production but has for the past four years been preoccupied with distributing massive government subsidies for renewable technologies, continuing the decade-long trend of slowing the extraction of fossil fuels from public lands, and using the EPAs regulatory authority to attack coal-fired generation. There is little if any common ground between the belligerents. The rate of gross domestic product (GDP) growth isnt expected to return to 2007 levels for several more years, according to the Congressional Budget Office. Worse yet, some economists are predicting a double-dip
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Gas Grabs Second Place


Over the past four years, one new force has appeared in energy markets, with revolutionary results. Thats the rapid and growing impact of natural gas liberated from tight

1. New normal. Residential demand dropped in 2012 while other sectors showed small gains. The increase in demand for electricity is projected to be small in 2013. According to the Energy Information Administration (EIA), The U.S. does not return to the levels of energy demand growth experienced in the 20 years prior to the 20082009 recession, because of more moderate projected economic growth and population growth, coupled with increasing levels of energy efficiency. Source: EIA, Annual Energy Outlook 2012
Right Axis: Residential Comm. and trans. Industrial Direct use

Total consumption (million kWh/day)

14 12 10 8 6 4 2 0 2010
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0.4 0.3 0.2 0.1 0.0 0.1 0.2 2011 2012 2013

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Devonian shale rock formations by horizontal well drilling and hydraulic fracturing. With prices in the range of $3/MMBtu, gas has galloped across the U.S. energy landscape with astonishing speed. According to the EIA, shale gas production in the U.S. increased from negligible amounts in 2000 to 5 trillion cubic feet (tcf), or 23% of U.S. production, by 2010. The EIA predicts that shale gas production will climb to 13.6 tcf by 2035, constituting half of total U.S. production (see Natural GasFired Plants Continue Rollercoaster Ride, p. 42). Energy guru Daniel Yergin, founder of consulting firm IHS CERA, recently wrote, Shale gas alone is now 10% of the overall U.S. energy supply. And similar technologies to recover so-called tight oil trapped in rock formations are largely responsible for boosting U.S. oil production by 25% since 2008the highest growth in oil output of any country in the world over that time period. As EIA data demonstrate, gas has become the fuel of choice for new, central-station electric generation, while King Coal is gradually retiring from the throne. Over the past 15 years, says the Department of Energy statistical agency, most new generation has been gas or wind. The EIA notes, In particular, efficient combined-cycle natural gas generators are competitive with coal generators over a large swath of the country. And, in the first half of 2012, these combined-cycle generators were added in states that traditionally burn mostly coal (with the exception of Idaho, which has significant hydroelectric resources). Illustrating its rise to royalty, gas stole second place from nuclear in the generating mix, as atomic energy in the U.S. dropped to 19% of capacity. In its September Short-Term Energy Analysis, the EIA reported, The share of total generation fueled by natural gas during the first half of 2012 averaged 30.4 percent compared with 22.3 percent during the same period last year. That was driven by gas prices that were lower than coal. Will that price differential in favor of gas continue? EIA figures are ambiguous. The statistical agency in the same report said, However, in June, the average Henry Hub natural gas spot price surpassed the average spot price for Central Appalachian coal for the first time since October 2011, indicating that the recent trend of substituting coal fired generation with natural gas fired generation may be slowing and will likely reverse. For another, it expects the continents largest demand region, the Northeast, to become a major source of supply. Overall, Bentek expects total U.S. and Canadian natural gas production to grow by about 11 Bcf/d (14%) between 2012 and 2017. More than 80% of that growth is expected to take place in the Northeast as shale gas production from the Marcellus basin continues to grow. This surge of supply is expected to shift gas pipeline flows across the continent, provide support for power sector demand growth, and allow liquefied natural gas (LNG) exports to occur from the Northeast and Southeast regions. (As this issue was going into production the EIA published its Annual Energy Outlook 2013 Early Release Reference Case, which projects the U.S. will become a net LNG exporter starting in 2016, as it did in the AEO2012 Reference case, and an overall net exporter of natural gas in 2020, two years earlier than in AEO2012.) Production growth in the Northeast is expected to far exceed that regions demand growth over the next five years. By 2017, Bentek expects the Northeast region will be net long 5.3 Bcf/d compared to expected supply and demand in 2013. By comparison, Southeast production is expected to decline 0.9 Bcf/d between 2013 and 2017. Meanwhile, Southeast gas demand from power generation, industrial plants, the residential and commercial sector, and from LNG exports is expected to grow by more than 2.5 Bcf/d. Bentek reports that Southeast gas demand for electric power generation has increased 130% since 2005 as power generators took advantage of falling gas prices. More than 30% of total U.S. power generation growth over the next five years is expected to take place in the Southeast. A nearly equal amount is expected in the Northeast.

A Question of Supply
Of course, new natural gasfired generation depends on market dynamics five and 10 years in the future, not just in 2013. Research firm Bentek Energy in a note published in November said it expects the North American gas market to undergo unprecedented changes over the next five years. For one thing, it expects traditional supply regions in the South to become net demand regions.

2. Electricity demand rises. This chart illustrates U.S. electricity demand growth based on a three-year moving average. Electricity demand (including retail sales and direct use) growth has slowed in each decade since the 1950s, from a 9.8% annual rate of growth from 1949 to 1959 to only 0.7% per year in the first decade of the 21st century, the same as the predicted annual growth of electricity demand from 2012 through 2035, according to the EIAs base case scenario. Source: EIA, Annual Energy Outlook 2012
Trendline 12 10 8 3-year moving average History 2010 Projections

Coal Leads But Is Losing Ground


During 2012, only one new coal-fired generating plant, the 800-MW Prairie State station in Illinois, came online in the U.S. According to The Brattle Groups analysis last year, about 30 GW of coal-fired generating capacity, representing around 10% of the U.S. coal fleet, was announced for shutdown by 2016 (see Coal Battered Early, Later Rebounds, p. 40). The economic consultants estimated that another 59 to 75 GW of coal capacity would eventually be added to that list of retirements. Though there was considerable noise during the election campaign about the Obama administrations putative war on coal, The Brattle Group analysis points to the rise of shale gas as the greatest cause of coals loss of power, concluding that gas prices are a
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Demand growth (%)

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much more significant influence on retirements than pending environmental rules. The analysis doesnt address whether the benefits of the regulation outweigh the costsa different, and bigger, question (Figure 3). But the Brattle analysis does not entirely dismiss the impact of new rules on coaland on electric reliability. The regulatory hammer could be the rule that imposes a cost on carbon dioxide emissions from power plants. Brattles study examined the impact of a carbon equivalent price of $30/ton hitting in 2020. That regulatory initiative, says Brattle, could mean coal plant retirements would jump from the current projection of 59 to 75 GW to 127 to 149 GW (Figure 4). Thanks largely to natural gas, coals position in the mix of fuels used to generate electricity has eroded, although the losses appear to have hit bottom in 2012. In 2005, coal accounted for 50% of electric generation; it declined to 42.3% in 2011 and 37.3% in 2012. Gas generation climbed to an expected 30.6% in 2012, up from 18% in 2004. The good news for coal unit owners is that, as natural gas prices rise, coal-fired generation economics improve. In 2013, coal is expected to produce about 40.1% of the nations electricity. As former Exelon CEO John Rowe famously observed, Coal will remain King. Gas will be Queen. nothing else. Nuclear needs to be looked at in the Age of Reason and not the Age of Faith, he said. It is a business and not a religion. Illustrating the economic fundamentals for nuclear, in late October, Dominion announced it would shut down its 556-MW Kewaunee unit (vintage 1973) in Wisconsin, taking a $280 million write-down. The plant was a victim of

3. Coal remains king. Despite the dire predictions of coals demise, coal-fired plants continue to provide the largest share of electricity, and will continue to do so through 2035 (the last year of the EIA analysis). Shown is electricity generated by fuel in 2010, and projections for 2020 and 2035. Source: EIA, Annual Energy Outlook 2012
2010 2,000 2020 2035

1,500

Billion kWh

1,000

500

Coal

Natural gas

Nuclear

Renewables

Market Ignores Nuclear


For the nuclear power industry, 2012 was a year of marginal activity, and 2013 promises to be a rerun. Again, John Rowe, who ran the nations largest nuclear fleet, has a clear-headed take on the future of nuclear power. Speaking to an American Nuclear Society meeting in 2011, Rowe recalled that 20 years ago he laid out conditions necessary for nuclear renaissance. Among them, high and stable natural gas prices. Today, he said, This condition cannot be met due to the influx of shale gas into the market. Shale is good for the country, bad for new nuclear development. Writing in the Winter 2012 issue of the Journal of Economic Perspectives, Lawrence Davis of the University of California, Berkeley, concluded, In 1942, with a shoestring budget in an abandoned squash court at the University of Chicago, Enrico Fermi demonstrated that electricity could be generated using a self-sustaining nuclear reaction. Seventy years later the industry is still trying to demonstrate how this can be scaled up cheaply enough to compete with coal and natural gas. For nuclear power, as for every technology competing in the electric marketplace, its a matter of economics, said Exelons Rowe, and
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4. Down but not out. Additions to the coal fleet are small in the coming years; new generating capacity will consist mostly of natural gasfired plants. A construction boom in the early 2000s saw capacity additions averaging 35 GW a year from 2000 to 2005, much higher than had been seen before. Since then, average annual builds have dropped to 17 GW per year. According to EIA projections, between 2011 and 2035, a total of 235 GW will be constructed, with relatively high annual additions in 2011 and 2012 of an average of 24 GW; about 40% are renewable plants. After 2012, the added capacity drops below 9 GW each year until 2025. Source: EIA, Annual Energy Outlook 2012
Other/renewables 60 Natural gas/oil History Nuclear 2010 Hydropower Coal Projections

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weak wholesale power prices and low natural gas prices. What had some industry observers wondering was why Dominion was unable to find a buyer for the plant.

Renewable Subsidies Set to Expire


The same observation about the primacy of economics is true for renewable energy generation, although many environmentalists

Poor investment track record. The failing or bankrupt financial status of many renewables-related companies after receiving economic stimulus funds shows that the government did a poor job in picking marketable technologies. Taxpayers did not get their moneys worth. Source: Institute for Energy Research
Company A123 Systems Abound Solar Amonix Babcock & Brown Beacon Power BrightSource Energy Ecotality Inc. Ener1 Evergreen Solar First Solar Fisker Automotive Mountain Plaza Inc. Nevada Geothermal Raser Technologies Solar Trust for Americaa Solyndra Inc. SpectraWatt SunPower U.S. Geothermal Junk (BB) Junk (BB-) Speculative (BB+) Junk (CCC+) Junk (B) Rating at time of investment Taxpayer exposure (millions) $249.00 $400.00 $21.60 $178.00 $43.00 $1,600.00 $126.00 $118.50 $5.30 $3,100.00 $529.00 $0.42 $98.50 $33.00 $2,100.00 $535.00 $0.54 $1,200.00 $97.00 Status today Bankrupt Bankrupt Bankrupt Bankrupt Bankrupt Distress Distress Bankrupt Bankrupt Distress Distress Bankrupt Failing Bankrupt Bankrupt Bankrupt Bankrupt Distress Distress

Note: a. Loan never closed because the company declared bankruptcy.

5. Stable portfolio. The amount of renewable generation available each year is most dependent on the rainfall that produces hydroelectric power. Rainfall was down in 2010 but rebounded in 2011. Average hydroelectric generation is predicted in 2013. The EIA reference case, shown in this chart, assumes the federal production tax credit expired on December 31, 2012. Source: EIA, Annual Energy Outlook 2012
Solar 10 Forecast 9 8 7 Geothermal Other biomass Wind power Liquid biofuels Wood biomass Hydropower

6 5 4 3 2 1 0 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

and the Obama administration seem to view renewables as sacred icons. Much of the administrations direct largess to renewables in the form of loans and grants, including large amounts of economic stimulus funds provided in 2009, unfortunately has gone into financial black holes, not green power (see table). The government has demonstrated that it is, in the words of former Obama economic advisor Lawrence Summers, a crappy venture capitalist. Thanks to governments other, and thoroughly bipartisan, offerings on the green altarin the forms of production tax credits, cash grants in advance of tax credits (the Treasurys infamous 1603 program), and state purchase mandates and market incentiveswind and solar have held their own in the generating mix in recent years, increasing generation market share from a barely noticeable 0.5% in 2005 to a still small but growing 2.4% in 2010. Almost all of that has been wind, which grew from 0.44% to 2.3% in that period (Figure 5). According to the American Wind Energy Association (AWEA), the lobbying group for wind power, wind installations in 2012 were on pace to almost match 2011s performance, when 6,816 MW of new nameplate capacity went online. For the first half of 2012, said AWEA, 2,869 MW of wind went online. By contrast, the wind industry put up 10,000 MW of new capacity in 2009. AWEAs figures show that another 10,312 MW of wind was in the construction pipeline at mid-year 2012, attempting to get built before production tax credits expired at the end of 2012. Not all of the wind projects AWEA lists as under construction are likely to be completed. A recent headline in the Yakima HeraldRepublic in eastern Washington, where wind has been a booming business, captures the prospects for wind in the year ahead: Economic uncertainty puts the brakes on Northwest wind power industry. The article notes that at least seven wind projects are up in the air in Kittias and Klickitat Counties, facing a shortage of electric transmission to markets in California and competition from low-cost natural gas. The wind industry began a strong lobbying campaign in mid-2012 aimed at restoring the production tax credit. AWEA has been working with the Boston-based advocacy group Ceres to push the production credit. Ceres last fall arranged for a business group, Business for Innovative Climate and Energy Policy, to write congressional leaders urging extension of the tax credit. That effort failed, but wind supporters hope to bring the topic up again during the coming debate over federal fis35

Quadrillion Btu

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cal and tax policy. Given Republican opposition to subsidies for renewable energy, the prospects for extending the production tax credit appear slim (see Grading My 2012 Industry Projections, a web exclusive associated with this issue). The 30% investment tax credit for wind projects also died on December 31. Even if Congress were to restore the wind subsidies for another year, that might not have an impact in 2013. According to George Nall, an executive with wind turbine maker Gamesa Energy USA, it takes at least 12 months for a new project to move from planning to construction, so another year of the tax credit wont help projects that arent already in the pipeline. For solar, the market for photovoltaic (PV) panels largely collapsed in 2012 amid a worldwide glut; there is nothing on the horizon to suggest a turnaround, according to the Solar Buzz market research firm. Thats good news for consumers who want to equip their homes with sun power, and those who install the panels, but bad news for companies making panels. A market shakeout, already under way, is likely to accelerate. Last fall, GTM Research predicted that 180 solar panel manufacturers around the world are likely to vanish by 2015, with 88 of those in the U.S., Europe, and Canada. By the end of 2013, cell and panel manufacturing in the U.S. could disappear completely. As an indication of the weakness of the PV market, in mid-October, Satcon, a large manufacturer of solar inverters, filed for Chapter 11 bankruptcy protection, citing $93 million in assets and $121 million in debt. Its stock was trading at under a dime a share. Greentech Media Editor-in-Chief Eric Wesoff commented, Clearly troubles in solar are not limited to module suppliers or thinfilm CIGS startups. While the PV business was getting clobbered, 2012 was a solid year for utilityscale solar, still tiny by any measure. That market may continue to remain healthy in 2013, driven by state renewable energy purchase mandates. According to the Solar Energy Industries Association (SEIA), the Washington lobby for the solar business, the second quarter of 2012 saw a record 477 MW of utility solar capacity come into service. Utility solar represented well over half of the total of 742 MW of solar capacity added in the second quarter. More solar was installed in the U.S. this quarter than in all of 2009, led for the first time by record-setting utility-scale projects, said SEIA President and CEO Rhone Resch. Solar technologies have seen a dramatic reduction in costs, notes investment banker Stuart Bernstein of Goldman Sachs. Once in
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the range of $90/W, solar is now available at $1/W (PV panels only). That, he predicts, will drive the solar market around the globe in the years ahead. But solar in 2013 will remain a barely perceptible portion of the U.S. electric generating mix, according to the EIA.

Texas Market Reform


A region worth watching in 2013 is Texas, where regulators are working to adjust market mechanisms to entice new generation capacity additions to meet demand in what is perhaps the countrys most economically robust region. Rising petroleum production not only is driving refinery expansions but also fueling chemical plant expansions and exports. Calpine said that load growth in Texas is north of 3% a year and that more than three dozen new commercial high-rises are planned for Texas, plus an expansion for the Port of Houston. Although Texas is reaching a point where new investment in generation is required to protect electric reliability, the needed investment to meet this demand has not yet begun to materialize. Independent power producer (IPP) Calpine said in November that 2015 on-peak spark spreads were sufficient to support investment at $500 to $600/kW. But the states grid, ERCOT, needs new investment that is expected to cost around $1,000/ kW at full replacement cost. Consequently, a gap exists between where forward prices are currently trading (at the $500 to $600/kW level) and where they need to be to incentivize new investment. Rational, economic investors would not invest at full replacement cost based simply upon todays forward energy curves, the IPP said. In Texas, this is called the missing money problem, said Thad Hill, Calpines executive vice president and chief operating officer. There are overwhelming indicators that the market must change. Texas regulators have been working to raise systemwide offer caps in an effort to incentivize new generation development. The systemwide offer cap was raised on August 1 from $3,000 to $4,500/MWh. Regulators approved a further price cap increase in late October, to $9,000/MWh by 2015. Besides raising the price caps, Texas regulators will focus their attention this year on market reform proposals to further encourage new generation. One option under consideration is a forward capacity market similar to PJM, but with some Texas twists. For example, there would be a single zone, and there would be no need for a minimum offer price rule. An analysis by The Brattle Group said the three-year forward period contemplated by the proposal would be sufficient to include new builds in the supply
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curve without creating risks of long-term forward commitments. Brattle also pointed to several risks with the proposal. First, the firm said it suspects that investors will start responding right away in anticipation of a capacity payment upon delivery. The danger in setting a 2015/16 price floor in early 2013 is that it will strongly mitigate the risk of capacity shortfall in 2015. Second, multiple administrative rules would need to be created related to load forecast, reserve margin requirement, demand curve shape, and resource adequacy qualification rules. Ongoing litigation over parameters and rules can create market uncertainty, the consultants said. Third, sticker shock could result and lead consumers to blame the new capacity product. This could be mitigated somewhat by high load growth and a three-year forward period, which likely would produce what economists refer to as an elastic supply curve. Sticker shock also could be eased by demand response programs, which would be allowed to enter and exit at a range of prices. A second market reform option under consideration by regulators is an energy-only market in which price caps are raised, reserve requirements are raised, and demand response is implemented. A concern is whether or not sufficient demand response growth will occur to maintain the target reserve margin. The Brattle Group said that by 2015, a significant shortfall could occur relative to the current 13.75% reserve margin target. By 2016 and beyond, more than 3,500 MW of additional demand response may be needed in ERCOT to meet the target.

The European Outlook


Europe had another interesting year in 2012. As economic woes continue to squeeze the 27 European Union (EU) states (Greece, Spain, and Italy in particular), the future of the single currency is rarely out of the news, and half a century of political union is under real strain. In Germany, the engine of Europes manufacturing economy, 1/10th of all adults are reported to be unable to pay all their bills. Half of all British people would vote to leave the EU, a recent poll found. Europes generally high energy costs might be eased by the planned single internal energy market, not due until 2014, despite the fact that other services, goods, and labor have flowed freely within the EU for 25 years. The European Commission recently let slip, however, that it is unhappy with progress toward the single energy market: Subsidies are too dominant in investment decisions, the generating market in many countries is still highly concentrated, and new entrants struggle to access the transmission grid. Still, the Commission is standing firm on its 20-20-20 targets for 2020: compared to
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1990 levels, a 20% improvement in energy efficiency and a 20% cut in CO2 emissions, plus 20% of total energy supply (generally taken to mean 30% of electricity generation) from renewables. Falling energy demand during the recession has cut the annual cost of the 20-20-20 plan to 48 billion (0.32% of Europes GDP in 2020), the Commission says, compared to 70 billion previously. As a result, the EU is now wondering whether to raise the 2020 carbon target from 20% to 30% if it signs up to Kyoto 2 at the UN COP-18 climate change summit in Doha, Qatar, at the end of November. This would cost rather more80 billion a year (0.54% of GDP)but would take Europe closer to its target of 95% decarbonization by 2050. to the Doha summit, and a potential eastwest split. Poland, which depends heavily on coal, says it has met its CO2 reduction targets and so should be allowed to keep spare emissions permits from the quota assigned to former Communist countries under the original Kyoto Protocol. Poland gained support from seven other east European and Baltic states, and the EUs Doha proposals have been watered down accordingly.

European Nuclear Divisions Reinforced


Progress toward a single energy market and the spread of transmission grids across national borders highlight the sharp differences between the nuclear policies of different European nations. The Czechs, for instance, frustrated at what they see as unfair use of their national grid to transport German power, are getting their own back by planning two new reactors at the existing Temeln nuclear plant in Bohemia. The site is just 70 kilometers from the borders of both Germany and (non-nuclear) Austria, and protesters from both countries joined Czechs opposed to completion of the original two modified Soviet VVER reactors in 20002002. With Germany now nuclearfree, the Temeln expansion plan looks set to cause deep divisions. Even France looks poised to reduce its dependence on nuclear power from 75% to 50% following the election of Socialist President Franois Hollande in 2012. Environment and Energy Minister Delphine Batho is currently gathering information and opinion with a view to launching a new national energy policy in 2013. The UK, meanwhile, would like more nuclear plants to replace its aging fleet, though it has had a hard time finding anyone willing to build them. Frances EDF put on hold its plan to build a new reactor at the Hinkley Point site in southwest England, and although the firm says it remains committed to the project, a decline in French enthusiasm for nuclear power could yield a different result. As seemed likely a year ago, Germanys RWE and E.ON decided not to go ahead with UK nuclear projects at Wylfa (north Wales) and Oldbury-on-Severn (western England). In November the firms sold their stake to Hitachi, which will build two or three of its Generation III+ Advanced Boiling Water Reactors in collaboration with Babcock International and Rolls-Royce. A stable, low-risk investment climate is as important to nuclear as it is to wind projects, so to get its nuclear new build, the British government has had to pay up. As POWER went to press, a new UK energy bill was believed to be within days of publication to parliament, having first seen the light of day in May 2012 as a draft. Pillars of the new energy bill are contracts for difference subsidies for nuclear and other low-carbon generation technologiesand a capacity market that will reward investment in gasfired plants as a backup to intermittent renewables. Critic Dieter Helm, professor of energy policy at Oxford University, says the proposals are too complex, bureaucratic, and top-down.
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Germany Feels the Squeeze


Enthusiasm for coal is not confined to eastern Europe. Germany gets more than 40% of its power from coal and is planning several new coal-fired plants to help fill the gap left by closing over 12 GW of nuclear capacity. Germanys nuclear exit, though rapid, was not as careless as some commentators have assumed. There was always a plan to make up the shortfall through renewables and to decarbonize the energy system completely by 2050. This has worked well in the sense that wind, solar PV, and biomass now provide 25% of Germanys electricity. But the transformation has not come cheaply: Costs associated with renewable energy now account for around 20% of German household electricity bills, and the proportion is rising. Against this, the German Institute for Economic Research points out that renewables, with their zero fuel cost, are already reducing inflation in wholesale power costs. With or without renewables, however, German power is expensive (consumers pay 0.25/kWh and industry around half that). EU Energy Commissioner Gnther Oettinger, a member of Chancellor Angela Merkels ruling CDU party, has spoken of runaway power prices and fears that decarbonization could lead to de-industrialization. CDU Environment Minister Peter Altmaier recently said that he was skeptical about parts of Germanys energy transformation. The rapid growth in renewables has brought technical issues too, such as the difficulty of connecting wind farms in the north of the country with industry in the south. Neighboring countries, including the Czech Republic and Poland, are complaining that high levels of German wind power put their grids under strain. Energy minister Altmaier has admitted Germanys lack of consultation with its neighbors during the transition period. He suggested future cooperation based on the Nordic model where, for instance, Denmark exports surplus wind power to Norway and imports Norwegian hydro power when wind speeds are low.
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Coal Upsets the Carbon Cart


Although progress toward the 20-20-20 targets has been on track so far, a renaissance of coal in power generation will offset some of the carbon cuts gained through Europes heavy investment in wind and solar power. (See THE BIG PICTURE: The Coal Pile, p. 10 in this issue, which shows three European nations among the top 10 countries with proposed coal capacity.) In September, Swiss bank UBS AG forecast that seven European countries will build 10 GW of new coal plants in the next four years, compared to 1.6 GW of gas-fired capacity. The favorable economics of coal compared to gas have been aided by a slump in carbon permit prices to below 10 per metric ton (mt) under the pioneering European Emissions Trading Scheme (ETS). Rather than letting the carbon market take its course, however, the Commission wants to boost prices by delaying some of the permits due to be auctioned in the 20132020 trading round of the ETS, scheduled to begin in January. Arguments continue over whether the Commission has the legal authority to do this. In any case, raising the carbon price to 40 to 50/mta level that might stem the dash for coalwould almost certainly require the quota of permits to be cut rather than simply delayed. The fall in the carbon permit price has also hurt plans for carbon capture and storage (CCS), because the ETS is supposed to provide a large chunk of the EUs budget for demonstration projects. With CCS driven by the climate agenda rather than enhanced oil recovery, Europe has fallen behind the U.S. on this front. At the moment the credible coal CCS projects remaining in the EU are Don Valley (UK), ROAD and Green Hydrogen (Netherlands), and Getica (Romania), while the UKs Peterhead project is a leader in CCS for natural gas. Coal is also behind the collapse in October of the EUs planning talks in the run-up
January 2013 POWER

2013 INDUSTRY FORECAST


One type of nuclear construction seems a sure thing. In October, it emerged that necessary safety upgrades to the EUs 132 nuclear reactors are likely to cost 10 billion to 25 billion. The upgrades are required following stringent stress tests in the wake of the Fukushima nuclear accident. necessary risk assessment was taking longer than expected. In September, a trio of studies by the European Commission found that, compared to conventional gas, extraction of shale gas generally has a larger environmental footprint. It also generates more greenhouse gas emissions than domestic conventional gas, the study said, but could be less environmentally damaging than long-distance gas imports by pipeline or as LNG. Although German operators such as RWE stress the ability of new coal-fired plants to respond quickly to varying production from wind and solar plants, it is, of course, gas turbines that have traditionally been seen as the natural partners of intermittent renewables. Worried about Europes falling use of gas for generation, Shell has joined forces with Danish offshore wind specialist Dong Energy, GE, Alpine Energie, and First Solar to create a lobbying group known as the Energy Partnership, described as the European coalition for renewable energy and gas. not be replaced, and that further decarbonization should be driven purely by setting limits on CO2 emissions. At the launch of the Energy Partnership on October 31, however, Commissioner Oettinger said he supported a binding target for the percentage of renewable energy by 2030. In solar PV, Europe gained 18.5 GW of capacity in 2011two-thirds of the global total of new installations, according to the EUs Joint Research Centre. The largest gains were in Germany and Italy. A group of manufacturers calling themselves EU ProSun have complained that China is dumping cheap solar panels onto Europe, prompting a Commission inquiry that may lead Europe to impose import duties, as the U.S. has done. But, again mirroring the U.S. experience, representatives from a counter-coalition representing the wider European solar industry, the Alliance for Affordable Solar Energy, say that free trade has helped to create 300,000 European jobs that would be put at risk by a trade war. At the end of September, the European Wind Energy Association (EWEA) announced that the EU had passed the 100GW milestone for installed wind power capacity, though high costs, permitting delays, and shortage of transmission capacity were delaying progress on large offshore wind projects. Danish wind turbine manufacturer Vestas had a terrible year in 2012, losing its entire board, with the exception of embattled CEO Ditlev Engel. Now the Danish firm is seeking a 20% equity investment; Mitsubishi has been mentioned after previous rumors of a Chinese buyer evaporated. Long the biggest name offshore, Vestas has now lost its lead to Siemens, which, according to Bloomberg New Energy Finance, was set to account for about 57% of Europes 4.5 GW of offshore wind capacity by year-end 2012. Following an initiative originally kicked off by UK Prime Minister David Cameron, Vestas, Siemens, and 42 other companies have joined Norstec, an alliance to cut the cost of offshore wind power. The British government wants to see a cost of 100/ MWh ($161/MWh) by 2020; according to Bloomberg New Energy Finance, the present cost is around $226/MWh, compared to $85 for onshore wind, $82 for coal, and $71 for natural gas. And there it is againnatural gas with the price to beat.

Europe Still Waits for Cheap Gas


European industrial gas prices in the range of 0.03 to 0.06/kWh (equivalent) and lower wholesale power prices as a result of the recession have cut margins for older gas plants and led to the mothballing or closure of several comparatively modern combined cycle gas turbine plants. In the medium term this situation could change if cheaper gas arrives by pipeline from the Caucasus and central Asia, as LNG from the U.S., or in the form of European shale gas. Poland still aims to be the European shale gas leader, though its reserves estimates fell by around 90% in the past year. The UK too continues to look promising, though commercial extraction is not expected to start for another five years. France has significant reserves but maintains its opposition to shale gas. In September, the Netherlands delayed a decision on shale gas until 2013 because the

Optimism Amid Turbulence for European Renewables


As 2020 approaches, some observers believe that the EUs 20% renewables target should

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Dr. Robert Peltier, PE is editor-inchief, David Wagman is executive editor, Kennedy Maize is a contributing editor, and Charles Butcher is European reporter for POWER.
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2013 INDUSTRY FORECAST

Coal Battered Early, Later Rebounds


For the first time, U.S. generation from coal and natural gas was equal in 2012, although just momentarily. Gas dominated early in the year, but as gas prices rose in response to supply and demand forces, coal use rebounded. Expect more of the same give-and-take in 2013.
By David Wagman

Courtesy: TVA

he U.S. coal-fired power generation industry is facing formidable obstacles to growthsomething it has long taken for granted. Most frequently cited is the Environmental Protection Agency (EPA) promulgating regulations that require expensive capital improvements that make the economics of continued operation of existing plants problematic and make the building of new plants unlikely for the foreseeable future. Another formidable opponent is historically low natural gas prices that have pushed coal-fired generation lower in dispatch order in some regions. As a consequence of those low gas prices, reduced coal plant operating hours and unit cycling drive up the cost of electricity production from coalhitting it where it has historically been strong. In response, some coal-based utilities are searching for that operating sweet spot that is a mix of coal- and gas-fired plants (in unique proportions), while others have decided to permanently make the switch from coal to gas.
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Musical Chairs for Dispatch Orders


Natural gasfired generation set the dispatch order on its head starting a year ago, when winter failed to arrive and gas prices plunged. But gas began giving up market share to coal during the third quarter, as rising prices and summer demand eroded at least some of the economic case for coal-to-gas switching. Natural gas, meanwhile, increased its market share from 21.4% in 2008 to 30.6% last year. The data make clear that the largest shift in market share took place last year, though the EIA anticipates coal will regain in 2013 some of the market share it lost in 2012. Whats more, coal-to-gas switching appears to have limits. For example, generation from natural gas at American Electric Power rose around 50% year-to-date, said CFO Brian X. Tierney during the companys third-quarter earnings conference call. But Tierney said that with year-to-date capacity factors for many of the gas-fired
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plants in its eastern sector approaching 70%, and with the recent increases in forward natural gas prices, the ability for more coal-to-gas switching is minimal.

Switching for Profit


Coal-to-gas switching in 2013 seems unlikely to hit levels reached last spring when a warmer-than-normal winter led to a massive overhang of natural gas supply as record natural gas production pumped more supply into the market. Prices plunged as a result, making it economical for power plants from the East Coast to the Deep South to switch from coal to natural gas for power generation. Even coal produced from the historically low-cost Powder River Basin in Wyoming was displaced as far west as Wisconsin and Minnesota. In response, natural gas producers exercised market discipline and slowed development and production. The Energy Information Administration (EIA) projected in November that higher natural gas prices will contribute to an 11.2%
POWER January 2013

2013 INDUSTRY FORECAST


1. Coal has competition. Coal for electric power generation is expected to regain some
of the market share it gave up to natural gas in 2012. Its clear, however, that for much of the past decade, natural gas has been clawing away at coals market dominance. Source: EIA, ShortTerm Energy Outlook, November 2012. Coal 14 Forecast 12 10 8 49.8% 6 17.9% 4 2 0 18.8% 20.1% 21.6% 21.4% 23.3% 23.9% 24.7% 30.5% 27.2% 49.6% 49.0% 48.5% 48.2% 44.4% 44.8% 42.3% 37.3% 40.1% Natural gas Petroleum Nuclear Hydropower Renewables Other sources

Pricing Model) auction scheduled for this coming May. Independent power producers arent immune to unpredictable natural gas prices. Jack A. Fusco, CEO and president of Calpine, said that 2013 gas futures prices suggest some continued coal-to-gas switching in the East, but probably none at all in Texas. As a result, the strong showing by the companys natural gasfired generating assets in 2012 seems unlikely to be repeated this year.

GWh/day

Coal Markets Poised for Improvement


All totaled, coal use for power generation was on track to fall by around 120 million tons in 2012, according to Peabody Energy. Most of that declinesome 100 million tonstook place during the first half of the year, when natural gas enjoyed its greatest price competitiveness. Since then, natural gas prices have shown robust price increases, said Gregory Boyce, Peabody CEO. Whats more, below-average weekly gas storage injections, prompt gas prices above $3.50/MMBtu, and forward strip prices above $4 all were favorable for demand for Powder River Basin and Illinois Basin coal, he said (Figure 2). John Eaves, president and CEO of Arch Coal, said a near-normal 20122013 winter could lead to a sizable step down in coal stockpiles and meaningful gas-tocoal switching. The St. Louisbased company remained cautious early in the fourth quarter, however, and planned to manage through a potentially challenging 2013. Next year and beyond, Arch expects an improvement in domestic coal markets. For one thing, Arch estimates that 45 GW of coal generating capacity could be retired by 2018. Much of that capacity represents the coal fleets smallest and least efficient units, which are already running at low levels. Eaves said those plants were on track to burn 40 million tons of coal in 2012, down from 75 million tons in 2010. Any incremental negative impact from these potential coal plant retirements is likely to be modest, he said. Eaves said the lost consumption could be offset by rising utilization at the remaining 280 GW of installed coal-fueled capacity. Collectively, the remaining coal plants are running below a 60% utilization rate, he said in late October. As U.S. power load grows, its reasonable to assume that the underutilized coal units could pick up that incremental burn lost from the retired plants.

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2. Coal consumption rises. Domestic coal consumption used for power generation is expected to rebound in 2013, regaining almost half of the production lost in 2012. Source: EIA Short Term Energy Outlook, November 2012
Right axis: Electric power Retail and general industry Coke plants 180 150 120 90 60 30 0 30 60 90 120 150 2010 2011 2012 2013

Total consumption (million short tons, mmst)

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decline in natural gas consumption in the electric power sector for 2013. Even so, power sector consumption this year is still expected to be about 1.8 Bcf/d higher than in 2011. And new fossil-fired power generation assetswhere they are being proposed at allare almost exclusively designed to burn natural gas. Each utility with significant coal-fired generation is looking for the most economic generation balance between coal and gas. For example, Michigan-based CMS Energy said that with seven of its coal plants mothballed in 2015 or 2016, and with MISO possibly increasing its reserve capacity requirement to 18%, the utilitys capacity shortfall could be as high as 1,500 MW. Its
January 2013 POWER

CEO, John G. Russell, said that natural gas likely will be the fuel of choice for the new capacity and that the company will decide this year whether or not to move forward on an $800 million capital investment for new capacity. FirstEnergy also said it entered into a nonbinding memorandum of understanding with American Municipal Power (AMP) to develop 873 MW of peaking capacity at its Eastlake plant in Ohio. AMP would provide all of the construction financing and own 75%. FirstEnergy would buy the remaining 25% and would manage the project and operate the units. The facility would be operational in early 2016, and FirstEnergy would be bid into the 20162017 PJM-RPM (Reliability
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Annual change (mmst)

David Wagman is executive editor of POWER.


41

2013 INDUSTRY FORECAST

Natural GasFired Plants Continue Rollercoaster Ride

The availability and low price of natural gas enticed many U.S. utilities to fuel switch on a grand scale in 2012. Increased demand has put upward pressure on prices, moving coal back to the top of the dispatch order in some regions. Expect the price momentum to shift often in 2013.
By Thomas W. Overton, JD
Courtesy: iStockphoto

100 90 80 70 60 50 40 30 20 10 0

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POWER January 2013

Year-over-year change (Bcf/day)

Total consumption (Bcf/day)

n unexpected boom in gas production as a result of advances in hydraulic fracturing, combined with an unusually mild 20112012 winter, sent gas inventories spiraling to record high levels. The traditional withdrawal season ended two weeks early, with storage levels touching bottom at an all-time high of 2,369 Bcf. The result was a crash in gas prices, which spent most of April 2012 below $2.00/MMBtu. Henry Hub spot prices finally hit a floor of $1.82/MMBtu on April 20. Awash in a sea of cheap gaswhich was now substantially cheaper on a MWh basis than coalplant owners across the country threw standard dispatch plans out the window and pushed open the throttles on their gas turbines. Coal-fired generation collapsed, while gas-fired power surged. In May, for the first time ever, gas power reached parity with coal power at about 32% each. Coal plants that had long been dispatched first as the core of baseload capacity saw themselves sidelined as peakers or idled altogether. Meanwhile, many combined cycle plants that had seen capacity factors around 30% were running at 80% or higher.

What Goes Up Must Come Down


The U.S. Energy Information Administration (EIA) projects that gas prices will average $3.49/MMBtu in 2013, which means they likely will spend some time above $4.00. Many analysts project even higher prices. Speaking at the LDC Canada Gas Forum in Toronto in November, Scott Speaker of J.P. Morgan projected an average price of $4.25/MMBtu for 2013, with continued growth beyond that. I see relatively good production, but high demand going forward, he said.

The $4 threshold is more than just psychological, as it represents the general point at whichwith the higher transport costs for coal factored incoal regains a cost advantage over gas. The EIA projects gas power burn to fall 11.2% during 2013, and some industry sources report that the gas-to-coal switchback has already begun. The drop in power burn is not expected to reduce pressure on gas prices, however, as residential, commercial, and industrial demand is projected to surge, leaving overall demand essentially unchanged for 2013.

1. Give and take. Natural gas consumption for electric power generation is expected to fall this year, giving up some of the gains achieved in 2012, when historically low prices drove coalto-gas switching across much of the Eastern Interconnect. Source: EIA, Short-Term Energy Outlook, November 2012.
Electric power Residential and commercial Industrial Other

2013 INDUSTRY FORECAST


2. Prices expected to rise. Natural gas demand may remain flat for 2013, but price forecasts agree (the blue and green lines bracket the 95% confidence zone) that the price is moving up. The only question is how fast. Source: EIA, Short-Term Energy Outlook, November 2012.
Historical spot price STEO forecast price 95% NYMEX futures upper confidence interval 10 8 NYMEX futures price 95% NYMEX futures lower confidence interval Projections

Waiting for Demand Growth


Another big uncertainty is demand for electricity generation. In 2012, shares of total U.S. electricity generation averaged 30.6% for gas and 37.2% for coal. Higher gas priceswhile coal prices remain flatare projected by the EIA to reset that breakdown to more traditional levels in 2013, back to 27.2% for gas and 40.1% for coal. But there are signs that any such rebound is likely to be temporary. With estimates of impending coal plant retirements ranging anywhere from 40 GW to over 80 GW by 2015, the ability of the coal fleet to shoulder significant price-induced gas-tocoal switching may be limited. This range of retirements equates to around 4 to 8 Bcf/day in gas demand. Spurred by lower prices, the need for greater dispatch flexibility, and favorable regulatory treatment, strong development of gas-fired generation is likely to continue. Meanwhile, even advanced clean coal plants face significant developmental roadblocks. Finally, the pace of the current economic recovery remains unclear. While the U.S. is seeing modest growth, there are clouds over Europe and Asia. Another downturn would limit electricity demand and likely keep gas power burn below 2012 levels for some time. Stronger growth, on the other hand, may exert upward pressure on gas prices.

$/MMBtu

6 4 2 0 Jan.2011 Jul.2011 Jan.2012 Jul.2012 Jan.2013 Jul.2013

Heating demand as a result of more normal winter weather, combined with growth in industrial consumption, should make up for the decreased power burn (Figure 2). Between early, thus far, sustained colder-than-normal temperatures and nuclear outrages and maintenance, gas market analyst Jay Levine told POWER in November, natural gas continues to remain buoyant and stronger than many anticipated. The fracking rush, like most booms, badly overshot its target in 20112012, leaving thousands of drilled but uncompleted gas wells waiting for a resurgence in prices. Gas at $2/MMBtu is a moneyloser for the drillers, but should prices begin edging above $4/MMBtu, returns on investment become attractive enough that it is likely some of these wells will return to production. In addition, the shale oil boom continues unabated, with associated gas accounting for an increasing percentage of the current production. While a shocking amount of this gas is being flared because of a lack of gathering infrastructurein North Dakota, almost 30% of it was flared last yearthis will change as several key pipelines in shale fields come online. Likewise, continued strong demand for natural gas liquids has kept production levels high despite a big drop in the gas rig count. Finally, despite the record power burn, gas inventories remain at record levels, having ended the 2012 injection season just below 4,000 Bcfan unthinkable amount not so long ago.

Political Uncertainties Remain


The first political uncertainty is a series of proposed rules on hydraulic fracturing and gas production. In April, the Environmental Protection Agency (EPA) issued its
January 2013 POWER

final rule on emissions from fracked wells. While the rule is fairly clear, the level of enforcement, and the commensurate costs, are not. Estimates have ranged from essentially negligible to hundreds of thousands of dollars per well. If the higher estimates prove correct, this could put a brake on future production. Another set of rules covering the entire fracking process on federal lands is currently pending from the Bureau of Land Management. With the final form uncertain, the impact is as well, but these too are likely to increase production costs to some degree. The other major political uncertainty concerns liquefied natural gas (LNG) exports. In mid-2012, shortly after Chenieres Sabine Pass export project received Department of Energy (DOE) approval, the Obama administration put all other applications on hold until after the November elections, ostensibly to allow further study of the effects on the domestic energy market. LNG exports are facing substantial opposition from a variety of quarters, creating some odd bedfellows: Environmental groups such as the Sierra Club are joining forces with petrochemical companies and several natural gas advocacy groups in an attempt to block exports. With upwards of 20 Bcf/day of proposed projects currently awaiting DOE approval or in the process of application, a few observers have taken a sky is falling view of the market, seeing huge amounts of domestic gas heading overseas. More levelheaded analysts have noted that, no matter the political outcome, the U.S. is unlikely to see much beyond 6 Bcf/day of exports, particularly given the cost to build LNG export facilities.
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Scenario Options for 2013


The first possible scenario takes the Obama administration at its all-of-theabove word and assumes the regulatory impact on gas remains light, while the U.S. economy continues its slow recovery. In this case, the large supply overhang is able to meet increased demand outside the power sector, keeping prices steady at around $3.50 to $4.00, in line with current projections. In the event gas demand exceeds projections, producers will have sufficient time to resume exploration. If, on the other hand, President Obamas reelection heralds new regulatory pressure on fossil fuelsboth gas and coalgas production may be handicapped just as significant coal generation begins to go offline. This would mean higher-thanexpected demand, possibly more than the current supply overhang can meet, leading to short-term supply constraints and consequent price spikes.

Thomas W. Overton, JD is POWERs gas technology editor. Follow Tom on Twitter @thomas_overton.
43

POWER IN RUSSIA

The Russian Power Revolution


Exports of natural resources have given Russia increased global political and economic clout. But domestically, the worlds fourth-largest generator of electricity has had to embark on the most ambitious reforms ever undertaken to modernize dilapidated Soviet-era power infrastructure and incentivize a massive capacity expansion to support a revived economy.
By Sonal Patel

n recent years, while Europe and the U.S. grappled with the problem of securing future environmentally sound energy supplies, the booming economies of China, India, and Brazil stole the global power spotlight with frenzied activity to expand their power infrastructures to meet exploding demand. Meanwhile, the Russian Federation shares the predicaments of all these regions. Comprising much of eastern Europe and northern Asia, its 17.1 million square kilometers (km) make the Russian Federation the worlds largest country in total area, and within that diverse enormity in the northern and middle latitudes of the Northern Hemisphere, it harbors the worlds largest natural gas reserves, the second-largest coal reserves, and the eighth-largest oil reserves. Russias population of 143.2 million pales in comparison with Chinas 1.3 billion. Even Indonesia, Pakistan, Bangladesh, and Nigeria have more citizens. But with the ninth-largest economy in the world by nominal value, it is home to the fourth-largest electricity market globally (after the U.S., China, and Japan), a massive network that includes 118,045 km of transmission lines, and more than 600 power plants with a capacity of over 5 MW each. Russias power story, always molded by the countrys political condition, formally began just after the genesis of the Soviet socialist republic in 1918 and grew after the countrys brutal civil war that culminated in Russias union with five other republics to form the Union of Soviet Socialist Republics (USSR). Communism is Soviet power plus electrification of the whole country was iconic revolutionary Vladimir Illyich Lenins famous formula. It was first declared in 1920 as the newly formed State Electrification Commission (or GOELRO, as it is abbreviated in Russian) presented the first 10-year plan to electrify the country via construction of a network of regional thermal, hydropower power, and combined heat and power stations to the Eighth Congress of Soviets in Moscow (see sidebar Illyichs Lamp). Fulfilled by 1931, the GOELRO plan which became a prototype for subsequent five-year planskicked off rapid progress for
44

Russias electricity sector over the first half of the 20th century. Local, regional, and interregional electricity networks were unified into the Soviet energy system, and major interconnections were established with socialist Central and Eastern European countries. In the late 1920s, the success of the central statesponsored electrification plan reportedly prompted Joseph Stalin to abandon Lenins New Economic Policy, which advocated some private enterprise, in favor of a highly centralized command economy,

implemented through a series of five-year plans. By 1935, dominated by a vertically integrated, state-controlled monopoly, production of electricity had increased by a factor of nearly 7, compared to the 1913 level (instead of a factor of 4.5, as planned), from 2 billion kWh to 13.5 billion kWh, and the Soviet Union had already established industries to furnish power plants with domestically engineered power equipment. After World War II, the Soviet Union became the second-largest electricity generator in

Illyich s Lamp
Vladimir Illyich Lenin, who led the Soviet Union until his death in 1924, championed a countrywide electrification campaign proposed by the State Electrification Commission (GOELRO) in 1920. He supervised the plan himself and frequently intoned that it would be critical to transforming Russia from a small-peasant basis into a large-scale industrial basis. It would, literally, bring enlightenment to the proletariat, he claimed. The plan arguably laid the foundation for industrialization in Russia during the 1920s and 1930s. It became such a basic part of daily domestic life in Russia that a phrase that translates as Illyichs lamp was adopted as the colloquial name for household incandescent lightbulbs whose sockets were suspended from the ceiling by a wire. Among Lenins last letters are correspondence with engineer P.A. Kozmin in which the feasibility of using wind turbines for the electrification of villages is discussed.

1. Communism is Electrification. The first plan approved by the Congress of Soviets in 1920 for the electrification of Russia by the State Electrification Commission (GOELRO) was lauded by revolutionary leaders of the young union as integral to communism and key to transforming Russia into an industrial powerhouse. Propaganda posters like the left one that reads The Soviets and electrification make up the base of the new world (from 1924) and the right one titled The Red Leaders (from 1955)frequently cited or referred to Lenins famous formula: Communism is Soviet power plus electrification for the whole country. Source: Russian Archives Online

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POWER January 2013

POWER IN RUSSIA
the world, behind the U.S., and in the 1950s, it pioneered the worlds very first nuclear power plant (the 5-MWe Obninsk reactor) and then two commercial-scale nuclear power plants. It also began building what was then the worlds largest hydroelectric plant, in Krasnoyasrsk. By the 1960s, as power output soared to 290 billion kWh, national electrification had reached 80%. Yet, even as economic growth slowed and power output increased from 741 billion kWh in 1970 to 1,728 billion kWh in 1990 (or about 17% of global generation), capacity failed to keep pace with the gargantuan needs of the Soviet Unions energy-hungry industry. The 1970s were marked by an ambitious Soviet program to expand nuclear power, and the country had already put into operation 25 reactors by 1986, the year that the Chernobyl disaster in the Ukraine punctured Russiasand the worldsenthusiasm for nuclear energy expansion. The sector saw an even more climactic turning point in 1992, in connection with the collapse of the Soviet Union, as some republics declared independence from the union, and eventual bankruptcy, as a weakened central government saw profits from state-owned enterprises evaporate after mass, rapid privatization. During this chapter of the industrys history, the Ministry of Electric Power was dissolved, and the Unified Energy System (RAO-UES) which had been established in 1956 as the Soviet Unions single energy distributorwas reborn as a state-controlled holding company that assumed control of 72 vertically integrated local power companies (oblenergos) accounting for 70% of Russias electricity generation. The remaining share was divided between another state monopoly, Rosatom, responsible for nuclear power, and a few small, independent power companies. Blocks of UESs shares (the entity still owns practically all of the nations transmission and distribution networks) were then sold to workers (numbering 600,000 at the time) and the public and, later, to domestic and foreign investors, leaving the government with a 53% controlling stake. As the country sank into a severe post-Soviet depression, while electricity prices were continually suppressed by the government to subsidize its highenergy intensity industries, economic reforms created an acute shortage of funds and stalled a number of power projects. UES was effectively crippled, running at a deficit of $1 billion on annual revenues of $7 billion, unable to invest in new capacity, grid improvements, or plant modernization efforts. Russias once-bright electricity future dimmed. annual gross domestic product (GDP) rate of 6% over the next decade. Soaring electricity consumption soon highlighted the countrys dilapidated power infrastructure. Due to neglect and outright theft, transmission and distribution losses in some regions, notably in North Caucasus, were reportedly more than 30%. Conceding that the state alone could not bear the costs required to maintain and upgrade its power infrastructure, the Russian government finally agreed to a proposal by newly installed UES head Anatoly Chubais, who had previously led privatization efforts of state properties as a minister in Boris Yeltsins administration in 1991, in the immediate aftermath of the Soviet collapse. Chubais argued that, if unreformed, the Russian power sector would not support future economic development, and that if the stillmassive UES were reformed, it would need to be designed to attract private investment. After much discussion and scrutiny of dozens of models presented between 1999 and 2000, the Russian Duma (consisting of its parliament and upper house) in 2001 finally approved a reform plan that called for an unbundling of the incumbent monopoly, creating an independent regulator, privatizing generation, and liberalizing electricity prices. In March 2003, the Duma set the legal basis for the reform while approving an Energy Strategy spanning from 2003 to 2020 (though a newer, adjusted one was later adopted in 2009) that provided state consensus on the countrys energy future. And, despite a few hiccups, reform has sped ahead, fired by broad-based political support. Dispatching Administration), a 100% stateowned open joint-stock company, has been set up to ensure the dispatch of electricity and stable functioning of the nations unified grid. The wholesale market is supervised by the Market Council, a noncommercial partnership that is governed by a supervisory board comprising representative market participants, the Russian government, and other market infrastructure bodies. Russia has also begun the formation of a competitive wholesale market, and prices in the power market have been gradually liberalized in recent years. About 80% of electric power is traded at nonregulated market prices. While the portion of state-regulated prices is expected to diminish, as required by the reforms, some state control is expected to continue throughout Russia (with the exception of certain geographically isolated regions, including the Russian Far East, Kaliningrad, and the Arkhangelsk regions) until at least 2014. Participants in the wholesale market also trade in capacity (on the basis of up to 10-year capacity supply contracts concluded at competitive prices), obligating generating companies to maintain a certain level of generating capacity and sometimes involving obligations to maintain or repair existing generation facilities as well as to build new ones.

The Power Sector Today


Russia is today one of the worlds top producers and consumers of electric power, with more than 220 GW of installed capacity (for comparison, U.S. installed capacity is approximately 1,000 GW). In 2009, the country consumed 849 TWh, a number that has been forecast to increase to 946 TWh by 2014 to accommodate plans for export to countries like China, Finland, Turkey, and Poland and, later, possibly to Pakistan and Afghanistan. Its fleet primarily consists of about 440 thermal plants, mostly fired by natural gas; only about 77 are coal plants. Thermal generators account for roughly 68% of total capacity, followed by hydropower (at 21%), and nuclear power (11%), according to statistics from the Russian Ministry of Energy (Figure 2). For details about Russias current power profile and plans to expand it, see the web supplement associated with this issue on www.powermag.com, Russias Power. Thermal Power. In Russia, geothermal and solar are considered thermal generation, but the bulk, 154.7 GW, is fueled by gas and coal. The country has some behemoth plants like the oil- and natural gasfired 5.6-GW Surgut GRES (Figure 3, GRES is an abbreviation from the Soviet era that denotes a state district power station), and among its larger coal-fired plants is the 3.8-GW Reft Power Plant. A common priority for wholesale gen45

Russia Transformed
In 2008, UESs holdings were unbundled: Generation, transmission, and distribution are today structurally divided and managed by companies with diversified ownership. Generation is produced by 14 territorial power and heating companies (indicated by the Russian abbreviation TGK) and seven wholesale power-generating companies (OGK). An antimonopoly service prohibits a single private owner from controlling more than 20% of generating capacity in one of eight defined regional zones. The state retains 100% interest in nuclearthrough the State Atomic Energy Corp. (Rosatom)as well as most hydropower and major transmission facilities. Among the sectors major players are Gazpromwhich evolved from dissolution of the Soviet-era Ministry of Gas Industry and continues to be 50.1% owned by the Russian governmentand a handful of foreign companies, including E.ON, Enel, RWE, and Fortum. The Ministry of Industry and Energy has primary responsibility for the power sector, while the System Operator (or Centralized
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A Revolutionary Reform
Then in 1998, Russias slumbering economy awoke and began growing at an unprecedented
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erating companies and territorial generation companies is to modernize their existing power plants and build new ones using advanced technologies. Hydropower. Russia harbors 9% of the worlds freshwater resources, and as a result, an immense hydropower potential. Yet, as the government acknowledges, only 20% of this potential is currently utilized, by 102 hydropower facilities, each of more than 100 MW, and one pumped storage plant (Figure 4). The largest of the countrys 46-GW hydropower fleet was for a long time the SayanoShushenskaya power plant in Khakassia, but that plant suffered a devastating explosion in August 2009 that killed 75 people and put several units out of service (Figure 5). (See Investigating the Sayano-Shushenskaya Hydro Power Plant Disaster, in the December 2010 issue of POWER, available in the archives at www.powermag.com.) The federation continues to hold a 60% stake in RusHydro, owner of 35.3 GW of generation capacity and the countrys largest hydropower firm, which evolved as a generating company after dissolution of the UES in 2008. With strong government backing, several initiatives are under way to develop the potential of rivers of the North Caucasus, in the Volga regions, and in Siberia. Nuclear Power. The countrys nuclear sector is wholly controlled by Rosenergoatom, a subsidiary of state corporation Rosatom. That firm operates 32 reactors in 10 nuclear power plants with a total capacity of 23.2 GW. These comprise six early VVER design pressurized water reactors, 11 current-generation VVERs, and 13 light water graphite reactors. Between the 1986 Chernobyl accident and the mid1990s, only one nuclear power station was commissioned in Russia (the four-unit Balakovo plant). Further development was restrained by an acute shortage of funds after the collapse of the Soviet bloc. Work is currently under way on 10 other reactors as well as on projects to increase the load factors at existing plants by 4.5 GW. Rosatoms international arm, Atomstroyexport, meanwhile, has three reactor construction projects abroad, all involving VVER-1000 units. Recognizing the strategic and economic significance of nuclear power, Russia last November reaffirmed priorities to modernize and expand its nuclear fleet and announced plans to invest $1.3 billion annually in nuclear research and development by 2020 (a 10-fold increase from figures proposed in 2007). Specific goals include demonstration of a full range of fastreactor technology by 2020, first by installing the pilot BREST-300 lead-cooled fast reactor at the Siberian Chemical Combine at Seversk in the Tomsk region as a forerunner to a series of 1,200-MW versions planned nationally.
46

Rosatoms long-term strategy envisions nuclear power making up a 45% to 50% share of the nations total power profile by 2050, and up to 80% by the end of the century. The plan, which calls for 43.4 GW of new nuclear capacity, involves moving to advanced fast reactors with a closed nuclear cycle and mixed-oxide fuel (see Russias Nuclear Mission, August 2010). Alternative Energy. Renewables make up a minuscule portion of Russias power profile, their development hindered by a lack of renewable energy subsidies, concerns over the transparency of the tendering process, and the level of market liberalization. Yet, the countrys energy strategy calls for a program from 2022 to 2030 that will be marked by an expansion of nuclear, hydropower, wind, and other renewables. The plan declares that by the end of the forecast period, renewables should account for 14% of the countrys demand.

The Grid. Russias national grid is referred to as the Unified National Electric Grid in Russia because it consists of seven regional power systems: North West, Central, Middle

2. Russias power profile.

Russias current 220 GW of installed capacity is mostly composed of thermal plants, about 60% of which is fired by natural gas and 40% by coal. Source: Russian Ministry of Industry and Energy

Nuclear 11%

Hydro 21% Thermal 68%

3. Behemoth gas.

With a total generating capacity of 5,600 MW, Surgut-2, near Surgut in Khanty-Mansi Autonomous Okrug is one of the largest natural gas thermal power plants in Europe. It is also the largest Russian power station operated by energy supplier E.ON Russia, which is majority-owned by E.ON. Startup of Unit 3 was planned for October 2012. The Surgut-2 station continuously provides Western Siberia and Ural with power and heat. Emerson Process Management is the main automation contractor for Unit 3 of the Surgut-2 power station. Courtesy: Emerson

4. Water storage.

RusHydros 1,200MW Zagorsk Pumped Storage Station Russias only pumped storage plantnear Sergiev Posad, was approved in 1974 and became operational in 2000. Zagorsk-2, with a future installed capacity of 840 MW, is currently being constructed next to it. Courtesy: RusHydro

5. In the aftermath.

The catastrophe at the 6,400-MW Sayano-Shushenskaya hydroelectric plant that killed 75 workers in southern Siberia on Aug. 17 , 2009, had a number of contributing causes, including design, operational, and repair weaknesses. Reconstruction of the plant is under way and is expected to be completed in full by 2014. Courtesy: Ministry of the Russian Federation for Civil Defense, Emergencies, and Elimination of Consequences of Natural Disasters

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Volga, North Caucasus, Urals, Siberian, and Far Easternwhich is not linked to an integrated grid (Figure 6). The bulk is owned by the state-controlled Federal Grid Co. (RAO FGC), which oversees Russias 118,000-km high-voltage transmission grid and plans to invest $14.5 billion between 2010 and 2013 to modernize it. Projects under way include a unification of the Russian and the West European transmission networks. The grid companys profits have been squeezed in recent years due to what it says are rising costs and the governments reluctance to raise regulated tariffs for myriad stateregulated monopolies such as the railway. a 10-year guaranteed rate of return on power produced at new plants. In return, the firms are obligated to build a range of gas, oil, and coal-fired power plants with fixed deadlines to boost the nations generating capacity by 30 GW (Gazprom alone will take on 9 GW) by 2017. A total of 140 new power plant blocks are already in the pipeline to be built between now and 2017, many of which will be gasfired combined cycle power plants. At the same time, the Federal Grid Co., owner of most of the countrys high-voltage transmission grid, plans to invest $25 billion between 2013 and 2017 to modernize its infrastructure, a program that includes renovation of the unified all-Russia energy grid and putting 16,965 km of new lines into operation. Yet, any progress on this front will depend crucially on how Russia overcomes the challenging hurdle to attract investment. Some industry observers are optimistic that it will succeed. Several foreign investorssuch as Finnish energy company Fortum, Italys Enel, and Germanys E.ONhave already entered the sector, enticed by liquidation of the former power monopoly UES in 2008, and many have reported profits from Russian ventures. According to Prof. Rolf Langhammer of the Kiel Institute for the World Economy, to attract an influx of foreign investment, Russias entry into the World Trade Organization (WTO) in the fall of 2011 sent a signal that foreign investors can count on legal guarantees and the protection of their intellectual property rights in the country. But others see continued problems with reform efforts, specifically that the sector still bears the legacy of the state-governed Soviet era. Alexander Kornilov, a senior analyst covering the electric power sector at AlfaBank, told business journal Russian American Business in 2012 that foreign investors were concerned about constant rule changes, pointing to one incident during early 2011 as an example, when senior government officials ordered caps on power tariffs that were deemed to be rising too rapidly. Investment will likely also hinge on the development of enough skilled labor. Qualified staff left the sector during the slump in the 1990s, and the next-generation workforce is critically lacking, with control unit engineers and maintenance specialists particularly in demand, industry experts report. Russia will also need to float its once-buoyant domestic power technology sector, which shrank during the transition period after the fall of the Soviet bloc and has been insufficient to meet surging demand for equipment. Major energy equipment firms like Siemens, GE, Alstom, ABB, Skoda Power, Schneider Electric, Westinghouse, and Mitsubishi Heavy Industries have already entered the fray and established a firm footing. By some reports, Russian technology for heavy duty gas turbines, ultrasupercritical steam turbines, gasification, and process control systems, as well as electro-technical equipment, lags far behind global standards, afflicted by limited funding for research

A Further Overhaul Planned


Mired so deeply and for so long within the government, Russias power sector has been vulnerable to the political and economic volatility affecting the country. Stricken first by dissolution of the Soviet bloc, which emptied state coffers, and then severely by the global economic downturn, Russias existing power fleet is in bad shape. Most power stations, built between 1960 and 1970, are said to have low efficiency, in the range of 33% to 35%, compared with 50% to 60% at modern gas-fired combined cycle power stations. More than 50 GW of generating capacity in the European part of Russia has reached the end of its design life. And, by some estimates, nearly 60% of all electric infrastructure is plain worn out. The grid, too, is aged: Of the 2.5 million km of power lines in Russia, 1.5 million km have reached the end of their economic life, according to research by Renaissance Capital. Recognizing the problem, the Duma in 2009 approved an updated Energy Strategy 2030 that calls for modernization measures valued at $615 billion. Among its main features is the replacement of old gas turbine units with combined cycle gas turbines, increasing efficiencies of coal and nuclear plants, and replacing obsolete analog technology with digital systems for reactor modernization. In a measure backed strongly by thenPrime Minister Vladimir Putin (now president of the Russian Federation), the energy strategy also calls for an expansion of power capacity so that by 2030, Russia will have a 17% reserve margin, the difference between available capacity and peak demand (the typical U.S. minimum reserve margin is 15%). With demand projected at 1,533 billion kWh by 2020, that feat will require the addition of at least 78 GW by 2020 and 173 GW by 2030 at a cost of $360 billion. Gazprom, the Siberian Coal Energy Co., and several other generating firms have signed capacity supply agreements with the industrys autonomous Market Council that involve
January 2013 POWER

6. Russias energy regions. The Federal Grid Co., an entity 80% owned by the Russian
Federation, maintains more than 1.22 million kilometers of transmission lines and 854 substations (with a total installed capacity exceeding 322,500 MVA) in the Unified Energy Grid (UNEG). The national grid comprises 73 Russian regions that are divided into zones, each falling under the control of one of the companys backbone electric grid branches (designated as MES). The sparsely populated Chukotka, Kamchatka, Taimyr, Yakutia, Magadan, and Sakhalin regions in the Far Eastern zone are not yet covered by the UNEG for lack of economic conditions. The national grid also includes about 137 inter-state electricity transmission lines with contiguous countries for import and export. Source: Federal Grid Co.

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7. Gas giant. Gazprom, owner of Russias
largest power generating assetsMosenergo, TGC-1, and WGC-2has a total capacity of 38 GW, or about 17% of Russias total installed capacity. The company, like others in Russia, is building several combined cycle power plants, seeking to boost its aggregate capacity to 44.8 GW by 2020. Its newest addition is a 450-MW combined cycle gas turbine that was commissioned at the Pravoberezhnaya Combined Heat and Power Plant in St. Petersburg on Nov. 23. Courtesy: Gazprom

2030, the Ministry of Industry and Trade calls for high import taxes on equipment manufactured abroad to reduce imported products in new projects to 10% by 2025.

Fuel Woes
Russia may have some of the worlds largest coal and gas reserves, but domestic generators using these fuels are reportedly subjected to higher prices and less flexibility in obtaining them than might be expected. Russias recoverable reserves of coal have been estimated at 173 billion short tonssmaller only than those of the U.S., which holds roughly 263 billion short tonsbut the country produced just 372 million short tons in 2011 (76% of which is hard coal), less than a third of U.S. coal production. In 2011, Russia produced about 510 billion cubic meters of natural gasthe largest by volume in the worldabout 60% of which was sold on the domestic market. But the countrys gas generators, which represent 60% of thermal generation capacity and around 40% of domestic electricity production, suffer a different ordeal: Stakeholders routinely raise concerns about the competitiveness of upstream fuel supply markets. One issue is that Gazprom (whose controlling stake is held by the Russian government)

and outdated production facilities. The government has reportedly bought controlling stakes in enterprises to optimize equipment production for generation companies. In the 2011-issued Strategy for the Development of the Electro Machine Building Sector till

dominates the domestic gas market with a 75% market share. According to some, Gazprom has cut back on the very high level of natural gas supplies for electricity generation because it can glean five times more money by exporting the gas to the west (27% of European Union gas comes from Russia). But Gazprom is also the countrys largest owner of power generating assets (Figure 7). Its generating fleet totals 38 GW, or 17% of Russias installed capacity, which raises concerns about the potential for the company to discriminate against competing thermal generators. It should be noted, however, that independent producers, such as Novatek and some Russian oil companies, are beginning to build a notable presence in the generation fuel supply market. An interesting perspective offered by Austin-based global intelligence company Stratfor suggests that Russias natural gas producers are being forced to rely on revenues from gas exports and may be suffering financially because government measures let domestic users pay a fraction of the price paid by Russias foreign customers. According to current Gazprom data, it costs Gazprom approximately $132 to produce or acquire and then distribute 1 tcm of natural gas, but its revenue from the domestic market is only $80 per tcm, which means Gazprom loses

Edition: 2012

INTERNATIONAL ELECTRIC POWER SOURCEBOOK


Over 10,000 contacts in every country and territory outside of North America
This is a must for anyone conducting business in the international electric power sector. Save yourself time and money with over 10,000 contacts in over 220 countries and territories all in one place. Covering Europe, Africa, Latin America, the Middle East and Asia you can make informed decisions based on the facts with a comprehensive overview of the electric power sector.
Key features: Conveniently broken down into 2 sections Directory section - Listings include: Electric utilities, IPPs and other private power companies Government and regulatory agencies Over 3,000 individual power plants. Country proile section - Detailed coverage of hundreds of asset-speciic developments including power plants and transmission system components. Each proile also has a brief review of overall economic and energy devel opment country-level power statistics and more.

For more detailed information and a list of all available Platts data and directories, please visit www.platts.com/UDIDataDirectories
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POWER IN RUSSIA
more than $50 per tcm sold domestically. Considering that the domestic market makes up 60% of sales, the loss is monumental, the group said in an analysis published in 2012. Gazprom has asked the government for a 45% increase in domestic natural gas prices by the end of 2013 and an end to price restrictions by 2014. If granted, Stratfor speculates, the increases will undoubtedly resculpt the countrys energy future and have major repercussions for its myriad gas generators and energy-intensive metals industries. If not, Gazpromwhich alone contributes around 20% of the state budget revenuescould find itself in trouble, given that the countrys domestic natural gas consumption is projected to increase, while sales to Europe are projected to decrease.

Have the Reforms Worked?


Describing Russias electricity sector reforms as the most ambitious ... ever undertaken, the International Energy Agency (IEA) in an April 2012 consultation paper calls the nations achievements so far impressive. But it warns that the reforms are still in their infancy, and the outcome remains uncertain at this stage. The 2008 privatization introduced several new players, and it managed to diversify generation ownership, yet government-owned enterprises still own or control more than 60% of total generation assets, the agency notes. And perhaps more alarmingly, a trend is emerging that points toward consolidation into government ownership after unbundling and privatization, which has implications for

competitive neutrality in the longer term. The IEA has called for increased diversity of ownership through further divestment, or initiatives such as virtual power or other mechanisms to sell rights to the output of publicly owned generators, which could provide a practical option for assets, like hydro or nuclear facilities, that are difficult to privatize.

Pervading Politics
Russias power story has come a long way from the campaign to install Illychs lamp in every household to enlighten the masses, and it continues to be shaped by political and economic forces. Today, despite reforms to increase investment, the energy industrys biggest flaw continues to be that it is dominated by monopolies controlled by a government whose leadership hasnt really changed over the last decade, some experts say. International rankings point to Russias propensity for deep-seated corruption, and Putins return to the presidency in May signaled that not much will change, some observers lament. Foreign investors are able to operate in Russia only if they establish good working relations with members of the dominating clans. The quickest way to be awarded projects and contracts in Russia is to offer those clans stakes in respectable international companies, as Mikhail Krutikhin, an analyst and consultant for the oil and gas industry and politics in Russia, said in a fiery opinion for Euractiv. But this could actually work to the benefit of efforts to modernize Russia, as Vladislav Inozemtsev, a much-cited economist and founder and director of the Centre for PostIndustrial Studies in Moscow, told German publication Speigel Online in November. No political or economic upheavals are expected between now and 2018 because the economic system is robust and flexible, he said, [a]nd the majority of the population will remain content because they have never lived as normally as they do now. At a lecture in Vienna earlier that month, Inozemtsev argued that corruption has emerged as a necessary outcome of the collective repression of Soviet times because it gives individuals a sense of control. The state, too, devalues collective action, and a system has emerged where bribery is the most effective means to reach any goals and solve any existing problems. Therefore, he says, state representatives who get used to corruption are not seen as foes, but as a systemic part of the regime. Under such circumstances, public service becomes business, corruption turns into a form of rent, and the protest against the regime diminishes.

Russias Gas Realm


Starting in the mid-1940s and continuing through the 1960s, the Soviet Union penetrated the Iron Curtain and developed a network to deliver natural gas first to Poland, then to Czechoslovakia, and finally to Western Europe, steeling a dependency and interdependencywith more than 30 countries for decades (Figure 8). Gazprom still exports a significant amount of gas to those countries, and in recent years it has (through its subsidiary Gazexport) also begun exporting liquefied natural gas (LNG) to serve the rising demand in Japan and other Asian countries. But in recent years, disputes between Gazprom and neighboring Ukraine, through which 80% of those exports travel via pipeline (the remainder traverse primarily through Belarus), have twice left parts of Europe in the cold, with countries such as Bulgaria, Germany, Greece, Hungary, Romania, and Slovakia enduring a total natural gas shutoff from pipelines running from Russia through Ukraine. In 2006, Russia turned off all gas exports to Ukraine for three days; in 2008, it cut shipments by 50%; and in 2009, a renewed debt spat led to a total disruption of supply that lasted more than 13 wintery days. Those incidents have prompted some European countries to seek out alternate sources of natural gas to ensure security of natural gas supplies. Meanwhile, Gazproms own iron grip on the world natural gas market has been enfeebled by the global shale gas boom, which has faded prospects for exporting gas to the U.S. and China. Breaking from a reluctance to discuss how the Russian Federation would approach that dilemma, Energy Minister Alexander Novak in August told Russian news agency Interfax that the Russian government would adjust its energy strategy for the period until 2030 to take into account the shale gas revolution, the emergence of new shale gas production technologies, and shale oil. Russia is also reconsidering its strategy because companies that previously planned to supply liquefied natural gas (LNG) to the U.S. have abandoned it for the European market, where more LNG is being received from the Middle East.

8. Blue fuel borders. Gazprom Group,


a company whose controlling stake (50.1%) is owned by the Russian government, in 2011 supplied about 55%or 468.4 billion cubic meters of natural gasto domestic users. Russian gas accounted for about a third of aggregate gas imports to Western Europe, and the Commonwealth of Independent States (CIS), former Soviet Union Republics, took in another substantial share. Courtesy: Gazprom Poland 2% Italy 3% Turkey 5% Germany 7% Other Western Europe 11% CIS/ Baltic states 15% France 2%

Russia 55%

Sonal Patel is POWERs senior writer.


January 2013 POWER

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The Electric Grid: Civilizations Achilles Heel?


Solar flares have proven destructive effects on transmission grids, but there are many other black swan events that threaten modern civilization. Experts disagree about which protective steps should be taken today.
By Kennedy Maize

n October 2011, a group of two dozen energy graybeardsveterans of energy policy discussions in the U.S. over the past 40 years or soassembled in Oak Ridge, Tenn., to think about what, to some, might be unthinkable. For two days, the group looked at the kinds of unanticipated events that have brought down civilizations. They called these disturbing events the Achilles Heels of Civilization. Traditionally, we have thought of these events in Biblical terms, as the white, red, black, and pale horses of the apocalypse: famine, pestilence, war, and death. A more modern metaphor comes from the Lebanese-American scholar Nassim Nicholas Taleb in his 2007 book Black Swans. In that book, he defines a black swan event: First, it is an outlier, as it lies outside the realm of regular expectations, because nothing in the past can convincingly point to its possibility. Second, it carries an extreme impact. Third, in spite of its outlier status, human nature makes us concoct explanations for its occurrence after the fact, making it explainable and predictable.

is only realistic to assume that the United States is no exception. It is even possible that forces have already been set in motion which could devolve into a scenario that would at least terminate our status as a great power and perhaps lead to a far worse fate. Some of these rara avis outliers are familiar, even obvious. Natural disasters lead the list: widespread droughts, earthquakes, tsunamis, infections that kill millions, nuclear war. Others may come to mind less easily. Sanders cites a slow but highly sulfurous volcanic eruption in Iceland in 17831784 that caused widespread crop failures and mortality spikes in Europe although it lasted only eight months, and two much shorter eruptions in 2010 [that] brought air travel to a halt in northern Europe. When the Oak Ridge energy gurus looked at modern American life, they saw

an unexpected weak spot in our civilization, an Achilles heel that is so ordinary we largely take it for granted. Dr. Ben McConnell, a retired Oak Ridge lab scientist, now a research scientist at the University of Tennessee, where he studies transformers and switchgear, was a participant in the Achilles Heel project. He told a Federal Energy Regulatory Commission (FERC) technical conference last May that the U.S. electric transmission and distribution grid offers a clear path to destruction of our way of life. When the Oak Ridge boffins looked at the U.S., McConnell said, they found that grid collapse came out to be the most serious problem that would have to be considered in the shortest time frame. Outside of the electricity industry, few fully understand the centrality of the grid to life in America today. The most graphic realizations occur when the grid goes

1. Storm damage repairs. Tennessee Valley Authority (TVA) linemen begin to repair damage to a high-voltage transmission tower caused by a recent storm. Courtesy: TVA

Identify the Many Threats


The Oak Ridge group had assembled at the behest of the U.S. governments National Intelligence Council (see sidebar), the Department of Energys (DOEs) Oak Ridge National Laboratory, and the University of Tennessee in nearby Knoxville. In an interview, Alvin J. Sanders of the University of Tennessee, one of the principals in the Achilles Heels group, told POWER, We were hunting Black Swans. Civilizationthreatening events, he said, are difficult to identify, but we know there are only a few, maybe a dozen. Otherwise, civilizations would fall far more rapidly than we know they do. In an unpublished paper he provided, Sanders writes, Every past civilization has been brought down by some event or combination of events. Great powers typically endure only two or three centuries. It
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down. Its not just a matter of light and comfort in our homes. Without electricity, citizens may have no access to potable water, sewage treatment, safe food, fuel supplies, traffic control, or health care. A large swath of the U.S. got a taste of what happens when the grid goes down at the end of June, when a heat wave led to a super derecho that blacked out millions of electric customers over a 10-state swath from Illinois to the Atlantic and killed at least 20 people. The outage began June 29 and lasted past the U.S. Independence Day holiday for hundreds of thousands. By July 5, FirstEnergy was estimating that 250,000 customers (probably some 500,000 people) in just its West Virginia service territory were still without electricity (Figure 1). As meteorologist Kristina Pydynowski explains, a derecho is a widespread and long-lived wind storm that accompanies rapidly moving showers or thunderstorms. The most severe derechos are given the adjective super. Winds measured 91 mph in eastern Illinois on Friday afternoon, June 29, and 81 mph on the southern New Jersey coast early Saturday morning as the derecho screamed across the country. Unlike typical summer thunderstorms that take down distribution lines and local transformers, the super derecho clobbered high-voltage lines and major substations. The windstorm took down 50 major transmission lines and more than 70 substations in Ohio and West Virginia. In the Washington, D.C., area, the derecho shorted out the substation serving the water treatment facilities of the Washington Suburban Sanitary Commission, depriving much of the area of drinking water for more than a day. Virginia Governor Bob McDonnell proclaimed the event the worst non-hurricane outage in the Old Dominions history. Not only is the electrical grid central to modern life, but the grid also has multiple vulnerabilities that make keeping it safe a very difficult task. Weather outages are common, although some, such as an ice storm, can do enormous damage. A January 1998 ice storm destroyed much of Hydro-Qubecs massive 765-kV transmission system, blacking out more than 3 erate its system with appropriate voltage criteria and remedial measures. The 2003 blackout also highlighted another chilling aspect of grid failure: the propensity of the system to suffer from a cascading failure. Because of the grids interconnectedness, grid failures can spread quickly, concatenating across the system. This same effect occurred during the 1965

Not only is the electrical grid central to modern life, but the grid also has multiple vulnerabilities that make keeping it safe a very difficult task.
million Canadians, causing 30 fatalities, and leaving many customers in the dark for weeks. Tropical storms, such as 2005s Hurricane Katrina, can also cause longterm and widespread destruction. Human error can also take down the grid in a hurry, as was the case with the massive August 2003 blackout that turned off power for 55 million people in the Northeast, Midwest, and Canada. According to the official inquiry, the prime mover in that event was a series of errors by operators and managers at Ohio-based FirstEnergy (FE). The DOE report on that event concluded that the utility and the reliability region staff failed to assess and understand the inadequacies of FEs system, particularly with respect to voltage instability and the vulnerability of the Cleveland-Akron area, and FE did not opblackout that slammed most of the eastern U.S., an event that began with a simple hardware failure in Canada.

Human Interference
In addition to human error, the electric grid is also quite vulnerable to intentional human intervention, from a mad person with a charge of dynamite at a crucial transmission tower to a surreptitious cyber-attack such as the U.S. and Israel created with the Stuxnet virus, to a deliberate stateordered explosion of a nuclear weapon to create an electrical and magnetic pulse that brings down the grid. Following the late-June Mid-Atlantic super derecho, former House Speaker Newt Gingrich tweeted that the event was a mild taste of what an EMP (electro-magnetic pulse) attack would do. Cyber attacks have gained the most attention recently, partly as a result of publicity arising from the Stuxnet attack on Irans nuclear program. As the grid becomes more complex, sophisticated, and computer-assistedsmart if you willit becomes more vulnerable to code hacking. Recent POWER articles (see the archives at www.powermag.com) discuss the growing areas of cyber vulnerabilities (Guidance on Cybersecurity for the Electricity Sector, June 2012) and threats to utility supervisory control and data acquisition (SCADA) systems (see Ensuring the Cybersecurity of Plant Industrial Control Systems, June 2012). But there also is a positive side to the increasing interconnectivity and intelligence in the grid. Identifying specific outages, down to the individual meter, becomes easier, as does measuring success
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What Is the NIC?


The National Intelligence Council (NIC) is a little-known, but increasingly important, Washington think tank that reports directly to the director of national intelligence, who on the federal governments organizational chart sits between the president and the intelligence agencies, including the Central Intelligence Agency, the Department of Homeland Security, and the Federal Bureau of Investigation. It describes itself as the intelligence communitys center for midterm and long-term strategic thinking. Originally formed under the 1947 National Security Act as the Board of National Estimates, the organization was transformed into the NIC in the 2004 Intelligence Reform and Terrorism Prevention Act. The NIC is the lead agency in producing the National Intelligence Estimates. The NIC says its goal is to provide policymakers with the best, unvarnished, and unbiased informationregardless of whether analytic judgments conform to US policy. The organization produces some reports that are classified and some that are public, including a series on the implications of climate change for a number of foreign countries. The group also supports research into long-term trends and challenges.

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ASSET MANAGEMENT
in restoring connections. Discovery News, the online magazine that is a companion to televisions Discovery Channel, reported in July, In the outage this weekend in the Mid-Atlantic states, smart meters provided power companies data about which houses are out without owners having to call in. Many of these wireless smart meters have been installed in just the past few months. The story continued by quoting Matt Wakefield, senior program manager of smart grid systems for the Electric Power Research Institute: They wont prevent an outage, but they might allow you to restore things more quickly. The North American electrical grid also faces threats from space (though not from aliens). The problem is the sun (Figure 2). As a new period of solar flare activity begins a predicted 11-year cycle, the grid could face increasing disruption caused by a deluge of geomagnetic particles and pulses in the next couple of years. A 1989 solar storm caused a major Ontario blackout and damaged large transformers as far south as New Jersey. Far larger solar storms have hit Earth in the past, before development of the electric power grid, including the legendary Carrington event of 1859. That solar storm severely damaged Englands telegraph system. Had the Carrington storm struck 150 years later, it could have led to enormous electric outages for scores of millions of people lasting many months, according to the experts (see The Great Solar Storm of 2012? in the February 2011 issue). conference. A webcast of that conference is archived at http://bit.ly/10QQksb. McConnell, who has been studying the issue for decades, said in an interview that NERCs analysis is flawed. NERC needs to do more homework, he said. They dont understand the problems facing the transformers. The transformer manufacturers are sweating blood over this and backup systems put the running costs of the system over the roof. Peter Pry, a former CIA analyst and congressional staffer who worked on a congressionally mandated Electromagnetic Pulse Commission, told the FERC meeting that he believes NERC is low-balling the potential impact of solar storms on the grid because of the financial consequences for the electricity industry. In an interview before the FERC meeting, Pry told POWER, This is not honest disagreement. Its not a legitimate disagreement among scientists. It is an industry attempt to cover up. McConnell stunned the FERC commissioners at the technical conference when he described the civilization-threatening reach of a massive grid failure. His suggestion for the best ways to cope with a grid collapse was equally stunning. One of the best ways to protect the grid, he said, is to go into islanding mode, the deliberate disconnection of sections of the grid to prevent cascading. The idea is heretical, as it requires abandoning economic dispatch for at least some period of grid operation. FERC Commissioner Cheryl LaFleur was astonished at McConnells suggestion. As a former acting CEO of National Grid USA, LaFleur is the commissions transmission and distribution guru. The question is whether inductive power released by a geomagnetic event will prevail over the reactive power that will cause the system to break apart, she said. Im struck by Dr. McConnells comment that the best way to survive would be the go back to more local geographic operation. Thats the exact opposite of the direction the electric industry has gone in the last 20 years. A lot of what we do at this commission is to interest people to think bigger and think across regions and do more transmission. McConnell nodded sagely. It might not be economic and we might all pay 100% more per kilowatt-hour during two or three days, he said. But the heck with it. Thats the way it ought to go to save the system. Because if we go down, if even a third of the grid is out, a 10th of the transformers in the base load structure went down, we would be in a world of hurt.

Threat Disputed
A recent FERC technical conference revealed a rift between federal regulators and the North American Electric Reliability Corp. (NERC), which reports to FERC on reliability issues, over the threat of geomagnetic disturbances from increased solar flares. Whereas most assessments have found that geomagnetic damage is potentially catastrophic, NERC in a report early this year downplayed the issue. NERC said it recognizes that other studies have indicated a severe [geomagnetic disturbance] event would result in the failure of a large number of [extra high voltage] transformers but added that the work of its own task force does not support this result. The NERC study said that the transformer problem is more likely in older transformers and clearly implied that a voltage collapse would take the grid down before transformers would be damaged by the induced currents. The NERC report, because it challenges the mainstream, consensus view of the threat of solar storms, caused considerable head-scratching at FERC. We read the latest NERC report, a FERC staff person reportedly said, and our reaction was, What the heck is going on here. It was very surprising. FERCs consternation led to the April 30, 2012, technical

2. Solar flares.

Over a four-hour period on Nov. 16, 2012, two prominence eruptions occurred. The action was captured in the 304 Angstrom wavelength of extreme ultraviolet light. Similar solar eruptions have caused transmission system disruptions. Source: NASA

Kennedy Maize is a POWER contributing editor and executive editor of MANAGING POWER.
52 www.powermag.com

POWER January 2013

FUTURE POWER

Distributed Generation: Californias Future


Once you synthesize all the elements of the Golden States clean energy strategy and extrapolate current trends, its easy to see that an impending break with the traditional power generation paradigm is coming, intended or not.
By Jason Makansi, Pearl Street Inc.
magine that youve spent several years digging into Californias multi-faceted clean energy policies. All the pieces of the puzzle are in place. Suddenly, you realize the finished puzzle looks a little different than the one on the cover of the box. When you sift through all the policy papers, presentations, and regulations, its clear that California is pursuing what is arguably the most ambitious clean energy strategy in the country, perhaps the world. When you read between the lines, its also clear that the state is embracing a distributed power paradigmsomething quite different from the familiar central station generating paradigm. Perhaps the scariest thing of all is that no one entity is in charge of implementing the strategy. According to a California Energy Commission (CEC) presentation this past summer, multiple agencies have independent authority to act on portions of the puzzle, but not the entirety of it. If youre thinking this has nothing to do with you, think again. It is striking to compare Californias energy aspirations and the energy strategy pursued by the Obama administration, at least until the super majority in the Senate got erased and the party in power was humbled with a big loss in the House of Representatives after the midterm elections in 2010. In 2009 a national renewable portfolio standard (RPS) was a real possibility, carbon cap and trade had even won the backing of major utility executives and passage in the Senate, a preference for working the demand side rather than the supply side permeated the stimulus funding and Department of Energy (DOE) programs, and the gauntlet around coal was being tightened. These are, coincidentally, all elements of the California strategy. It may seem like ancient history, but it was less than three years ago. Today, with a Democratic Party super-majority in both houses of the California legislature supporting Democratic Governor Jerry Brown, impeding the ambitious clean energy agenda is far less likely. And to be fair, many of the
January 2013 POWER

programs and policies were also advanced under Republican governors as well.

Chiseling at the Paradigm


First, a little history is in order. Since the dawn of modern day electricity supply and delivery, the prevailing paradigm has been big iron, economies of scale from larger and larger power stations, longer and longer transmission lines, a diversity of energy sources, and in effect socializing the costs among all ratepayers in a service territory under a regulated rate of return business model. The Public Utility Regulatory Policies Act (PURPA) of 1978 was the first crack in that paradigm. However, it did not break open the big iron paradigm as much as it broke open the regulated and vertically integrated electric utility business model. Over the past decade and a half, there has been a drive to lower the industrys carbon footprint, displace coal with natural gas, add renewable energy, and get more out of the existing nuclear fleet. But once again, solar and wind energy facilities and gas-fired plants got bigger and more centralized, not smaller and more distributed. In the past five years, thanks to massive government expenditures, intelligent grid technologies have been deployed as a propellant to make conservation, energy efficiency, and demand side management the equal of supply side options. Since the 1970s, the industry has seen small waves of distributed energy systems: total energy systems (that is, cogeneration, in the early 1970s), packaged cogeneration units (early 1980s), microturbine generators (late 1990s), and fuel cell units and rooftop solar photovoltaic systems (the past decade). With the exception of rooftop solar, whose wave is still advancing, these waves hit shore and quietly receded. Ultimately, the centralized big iron paradigm prevailed.

uted generation (DG)localized generation close to consumer loads (Figure 1)as part of a 20,000-MW renewable energy buildout included in the states 33% RPS law. Approximately 3,000 MW of DG already exist in California, and an additional 6,000 MW are under development or authorized. The obvious regulatory preference for DG is indicated by the fact that it is 60% of the total new renewable capacity expected to be added. Interestingly, California includes individual system size up to 20 MW in its DG planning. Supporting the solar portion of DG are the incentives provided in Senate Bill (SB) 1 and the feed-in tariffs in SB 32. Projects based on gas-fired small turbines and engines need not apply for those perks. Large-scale renewable facilities represent the other 8,000 MW in the RPS that is supposed to be met by 2020. Geographic and permitting realities in the state suggest that the large-scale facilities must be accompa-

1. Ambitious planning.

Distributed generation is planned for deployment based on, among other things, unemployment characteristics and where low- to moderateincome households are located. Source: California Energy Commission
PacifiCorp
DG projects (MW) 1173 174466 467948 9493006 IOUs POUs Counties

PG&E SMUD

SPP Mountain Utilities

Silicon Valley Power

LADWP

SCE LADWP Anaheim PUD SDG&E IID Bear Valley Electric

California Is Different
A key element of Californias clean energy strategy is a target of 12,000 MW of distribwww.powermag.com

53

FUTURE POWER
2. Water rules challenge power producers. Many of Californias fossil power stations rely on once-through cooling, now under threat by a bill pending in the California assembly. Source: California Independent System Operator

nied by relatively long transmission lines if the renewable-based electricity is going to find customers. Thus, 13 critical transmission projects are contemplated along with the wind and solar installations. Taking reality into account, though, how likely is it that the necessary transmission will be built by 2020? Even in an infrastructurefriendly state, transmission lines can take up to 10 years to permit and build. By state, California is one of the largest importers of electricity in the country. Importing renewable energy from the hydro- and windrich Pacific Northwest and solar-rich Nevada and Arizona seems at first blush a smart way to meet the RPS. If you could get the transmission built, Colorado and Wyoming also could send California plenty of wind energy. Indeed, there are plans to build massive wind energy facilities in those states to serve the California market. The recent Federal Energy Regulatory Commission (FERC) Order 1000 supports regional transmission planning and socializing the costs among ratepayers in the region. Part, if not most, of the inspiration for FERC 1000 was to get renewable energy to markets. The Department of the Interior, DOE, and other federal agencies are also supporting the development of big renewable energy

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POWER January 2013

FUTURE POWER
zones in the western states through expedited reviews and permitting. Unfortunately, Californias RPS policy is designed to discourage out-of-state renewable energy flows, although the restrictions take effect in the latter years of the mandate. As measured by energy (not capacity), 75% of the mandated flows must be in-state bundled transactions which caps the out-of-state opportunity. Also, SB 2X (the formal name of the RPS law) ensnares public utilities for the first time in the RPS program. Even if California did encourage out-ofstate flows, the regional strategy is questionable for other reasons. FERC 1000 could be challenged in the courts, and the means tests for socializing the costs, which requires valuing the benefits for specific classes of ratepayers, might be too arduous. The problem with regional development is that there is no regional government. Finally, multi-state transmission lines are more difficult to permit than in-state ones. an economy tanks and demand for goods and services is destroyed. Well, California is practicing a version of supply destruction. The state consumes very little coal for electricity production, although the Los Angeles Department of Water & Power (LADWP) gets electricity from the large coal-fired Intermountain power station in Utah and the Navajo station in Arizona. However, several oil/ gas-fired steam plants still operate along the coast, primarily in southern California. They depend on once-through cooling (Figure 2), a practice that could be outlawed by the pending Assembly Bill (AB) 1318. This bill, restricting thermal discharges, along with a new carbon emissions performance standard (1,100 pounds CO2/MWh), the strictest NOx emissions in the country, and other collars on fossil fuel in AB 32 (The Global Warming Solutions Act), are all likely to force the retirement of 15,000 MW of fossil-fired generation. Do the math: 15,000 MW of fossil-fuel capacity is to be replaced with 20,000 MW of renewable energy, 12,000 of which is DG. This suggests that DG is no longer something that is eating away at the edges. Its critical to the supply side of the equation in California. When you superimpose a map of where the thermal plants are being retired, where the population centers are, and where transmission is constrained, it becomes pretty clear that DG will be replacing the existing supply, not supplementing it (see sidebar). A map showing transmission constraints in Southern California Edisons territory also tells an interesting story (Figure 3). The power plants (not shown) are mostly along the coast, and the planned centralized renewable capacity is in the southwestern part of the state. According to the utility, the transmission constrained areas have little or no operational margin to handle any re-

References

Supply Destruction
It would be one thing if California were simply adding renewable energy and DG capacity to meet future load growth. But thats not the case. You may have heard the term demand destructionwhat happens when

3. Moving power problems. Getting power from the southwestern part of the state is constrained by transmission because so many power stations are located along the coast, stations whose operation is threatened because of pending once-through cooling prohibitions. Source: Southern California Edison
Enterprise zones SCE transmission constrained counties SCE transmission unconstrained counties Fresno

Sequoia Valley

Nevada

Barstow

San Bernardino Long Beach Santa Ana Coachella Valley Arizona

Pac

ific

Oc

ean
San Diego Mexico

2012 Integrated Energy Policy Report, Draft Lead Commissioner Report, California Energy Commission, October 2012. Californias Clean Energy Future, Implementation Plan, CEC, CPUC, California Air Resources Board, CAISO, California Environmental Protection Agency, September 2010. CPUC Energy Storage Proceeding R. 10-12-007, Energy Storage Framework Staff Proposal, California Public Utilities Commission, December 2011. Energy Storage Phase 2 Workshop, Arthur ODonnell, Regulatory Analyst, California Public Utilities Commission. Implications of Integrating Wind at Scales That Matter for Climate Policy, Victor Niemeyer, Electric Power Research Institute, presented at the CTOTF Workshop, Integrating Renewables into the Generating Mix: Challenges and Unknowns, September 2010. LADWP Status Report on AB 1318 on Capacity Requirements/Emissions Implications, Mohammed Beshir, Electricity Infrastructure Issues In California Workshop, June 22, 2012. Overview of Electricity Infrastructure Issues, Michael Jaske, California Energy Commission, 2012 IEPR Update Workshop, Los Angeles, June 22, 2012. Prioritizing Geographical Areas for Renewable Energy Development, Southern California Edison, Lead CEC Commissioner Workshop on Identifying and Prioritizing Geographical Areas for Renewable Energy Development in California, May 10, 2012.

January 2013 POWER

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FUTURE POWER
4. Snubbing offshore wind. Offshore
wind is excellent in Northern California, but no one talks about developing it. This map shows the annual average wind power estimates at a height of 50 meters and ignores environmentally sensitive areas. Source: National Renewable Energy Laboratory Wind power class 3 4 5 6 7 Resource potential Fair Good Excellent Outstanding Superb

distribution of network power flows without potentially adverse grid reliability impacts. What this means is that even small changes to the network flow patterns, such as from developing more renewable energy, may not be possible without significant transmission upgrades. According to the LADWP, the myriad clean energy mandates require the public utility to change 70% of its power system in a relatively short period of time. If power supply inside population areas is being shut down and renewable power to the west inside or outside the state cant get in, it seems certain that new DG facilities have to replace the older power station capacity.

tivities. Yet Northern California has some of the best offshore wind resources (Figure 4) in the country, and the offshore West Coast as a whole has some of the best oil/gas resources (Figure 5) outside of the Gulf of Mexico.

Distributed Storage
California has been active in developing energy storage technologies for many years; its one of only two states with an active research, development, and deployment program (New York being the other). It is also the only state considering, through AB 2541, setting targets for how much energy storage utilities should procure. The California Public Utilities Commission (CPUC) is scheduled to make its recommendation by October 2013 for a first energy storage procurement target to be achieved by affected load-serving entities by December 31, 2015. The recommendation, however, can also be that no target should be set. The CPUC is currently developing use cases to determine commercial readiness of technologies, operational viability, benefit streams, policy options, and deployment barriers. Storage has also become a key element in the states Integrated Energy Resource Plan. However, relevant agencies (CPUC, CEC, and the California Independent System Operator) planning and policy documents and presentations almost exclusively focus on distributed storage. Bulk storage solutions, like pumped hydro storage (PHS) and compressed air energy storage (CAES), are hardly mentioned, even though at least a dozen PHS projects are in active development in the state, and several others in neighboring states could serve the California market. Three CAES projects are also being contemplated by utilities in the state; two received stimulus funding. However, the CAES projects are proceeding slowly, if at all. Storage systems and natural gasfired plants, in fact, now are considered mostly as support for filling in around intermittently available renewable energy. Quoting from the latest version of the CEC Integrated Energy Policy Report (IEPR), Integrating [intermittent resources] will require a combination of complementary resources like energy storage, demand response, smart grid technologies, and flexible natural gas plants. In fact, every mention of energy storage in the IEPR, except one, discusses storage in connection with distributed resources.

Jobs, Jobs, Jobs


DG is also an important part of the states economic development plan. A big motivation for the states clean energy strategy is to have it serve as an engine for jobs creation and as an export base for advanced electricity infrastructure and electric vehicle systems (another element of the California strategy). Interestingly, the location of DG systems is being allocated on the basis of electricity consumption (weighted 40%), low- to moderate-income households (20%), unemployed workers (20%), and distribution system capacity (20%). So, not only will the manufacturing of DG systems create jobs, installing them where the unemployed live also will help put people to work, so the theory goes. Estimates of the cumulative number of jobs (20112020) that will be created through the states clean energy strategy show that demand-side activities will be responsible for three to five times as many jobs as activities in renewable energy and five to 15 times as many jobs as activities in transmission. Its pretty clear where the state believes the job creation engine lies. Not surprisingly, while the rest of the country latches onto the shale gas revolution, the West Coast has seen the largest reduction in natural gas production of any region in the country. Production has declined 33% there while, for example, production more than doubled in the eastern U.S., according to data from the Energy Information Administration. Its truly a fascinating dichotomy. California is driving its economy by reducing energy consumption, while one of the only jobs engines in the eastern part of the U.S. during the recession and prolonged weak recovery has been the boom in oil and gas extraction from shale plays.

5. Ignoring other offshore resources. Offshore oil and gas resources that could
be leased from the federal government are also not part of any California energy plan. This map shows offshore undiscovered technically recoverable oil and natural gas reserves. Source: Minerals Management Service, Department of the Interior

Off Limits

Washington/ Oregon Northern California Central California

0.4 Bbl 2.28 Tcf

2.08 Bbl 3.58 Tcf 2.31 Bbl 2.41 Tcf

No Coastal Supply
Southern California 5.58 Bbl 9.75 Tcf

One things for sure: California isnt looking offshore for any of its energy needs. As states along the Eastern Seaboard and the Gulf Coast eye offshore wind enthusiastically, the resource isnt even mentioned in California planning acwww.powermag.com

Jason Makansi (jmakansi@ pearlstreetinc .com) is president of Pearl Street Inc., a technology deployment services firm. This article is based on material taken from a PGS Energy Training Seminar developed and presented by the author in Sacramento, April 2012, and Portland, Ore., October 2012: California Clean Energy and the Rest of the West.
POWER January 2013

56

NEW PRODUCTS
Rotary Peristaltic Pump

TO POWER YOUR BUSINESS

Vanton Pump and Equipment Corp.s portable, nonmetallic Flex-I-Liner rotary peristaltic pump evacuates drums and totes containing acids, caustics, salts, chlorides, and reagent grade chemicals, without corrosion of the pump or contamination of the uid. The self-priming design has no seals to leak or valves to clog, and the pump can run dry for extended periods without damage. Compact in size with integral handle, it ts on drum lids without protruding and has sufcient lift characteristics to operate from the oor, skid, or stand. Only two nonmetallic parts contact uid: a thermoplastic body block and an elastomeric exible liner that can be replaced in the eld without special tools. A rotor mounted on an eccentric shaft oscillates within the exible liner, imparting a progressive squeegee action on the uid trapped in the channel between the liner and the body block. Flanges on the exible liner are pressed to the side of the body block by concentric grooves on the bracket assembly and the cover plate, isolating the uid to the channel. The pump is suitable for ows from 0.33 gallons per minute (gpm) to 40 gpm (1.25 to 151 liters/hour) and pressures to 45 psig (310 kPa) at temperatures to 250F (121C). (www.vanton.com)

High-Speed Precision Rotation Stage


Newport Corp. introduced the compact and high-torque RGV100HL highspeed precision rotation stage. Developed to accelerate loads having higher rotational inertia, the new stage is compatible with Newports XPS-DRV02 driver. The RGV100HL provides the same high resolution and outstanding positioning performance as Newports legacy RGV100BL precision rotation stage while delivering three times the torque and ve times the acceleration. Direct-drive technology provides faster rotating speeds with superior reliability and enhanced positioning sensitivity. By integrating the bearings with the motor, the stages footprint is only 115 mm x 115 mm. A precision glass scale encoder guarantees 0.0003 degrees repeatability and 0.0001 degree minimum incremental motion. The brushless DC torque motor with rare earth magnets optimizes the available torque to deliver extremely rapid point-to-point motions. The device is ideal for applications requiring fast dynamic response and for tasks that require moving larger platens, such as sensor calibration, laser micromachining, micro-robotics, and motion simulators. (www.newport.com/RGV100HL)

Handheld Laser Scanner


The NVision Handheld laser scanner is a powerful portable scanning device that is capable of capturing 3D geometry from objects of almost any size or shape. The scanner is attached to a mechanical arm that moves about the object, freeing the user to capture data rapidly with a high degree of resolution and accuracy. As a part is inspected, the scanner generates a point cloud consisting of millions of points, each with x, y, z coordinates and i, j, k vectors. Integrated software converts the point cloud to an STL polygon. An optional tripod provides complete portability in the eld. Intuitive software allows real-time rendering, full model editing, polygon reduction, and data output to all standard 3D packages. The scanner could substantially reduce the time to reverse-engineer turbine blades and other components, and its portability means parts suppliers can use it at customer facilities to reverse engineer parts that are too big to ship. (nvision3d.com)

January 2013 POWER

www.powermag.com

57

NEW PRODUCTS
An Evolution in Bolt Security
Chicago-based Nord-Lock added a new dimension of safety to bolt security with the launch of the Nord-Lock X-series washer, which combines Nord-Locks wedge-locking protection against spontaneous bolt loosening (due to vibration and dynamic loads) with an exclusive spring effect that protects against slackening due to settlement and relaxation. The principle of Nord-Lock X-series washers includes multiple functions that act on the bolted joint to maintain preload and prevent spontaneous bolt loosening. As with Nord-Locks original washers, each washer pair has cams on one side and radial teeth on the opposite side to secure the bolted joint with tension instead of friction. The Nord-Lock X-series washers conical shape also creates an elastic reserve in the bolted joint to compensate for the loss of preload and prevent slackening. (www.nord-lock.com)

Explosion-Proof Carted LED Light


Larson Electronics Magnalight.com unveiled a wheeled, cart-mounted explosion-proof LED light with swivel mounting. Designed for versatility and easy light placement, the EPLCD-48-100LED Explosion Proof Low Prole LED Light provides the convenience of a wheeled car-mounted lighting system combined with the versatility of a swivel-mounted lamp. This LED light provides high output and the ability to easily maneuver and angle the lamp assembly for better illumination of areas not easily reached with standard cart lights. The system offers operators in hazardous locations a powerful lighting solution that can be easily maneuvered around the work area and positioned for the best coverage possible. Its swivel mounting bracket design allows operators to roll the light into position and then ip or angle the lamp assembly for the best coverage of the workspace. The lamp assembly on this cart is a 100-W LED design that produces 7,000 lumens of highquality white light; it also has 100,000-hour rated service life. (magnalight.com)

Battery-Powered Electromagnetic Flowmeter for Remote Sites


Endress+Hausers newly released Proline Promag L800 battery-powered electromagnetic owmeter is an ideal ow measurement device for water and wastewater systems located at remote sites. The owmeter has an integrated Global System for Mobile Communications and General Packet Radio Services (GSM/GPRS) cellphone system that allows data, such as alarms or totalizer counts, to be transmitted as e-mail over the cellular network. All the owmeter needs is a cellphone Subscriber Identity Card (SIM card) from the local cellphone provider. The owmeter can then be congured as a point-to-point connection, or as a modem that can be openly accessed via the Internet or a company intranet. Once congured, an operator at a central control room can receive alarms, query totalizer readings, and change the owmeter conguration. The owmeters built-in data logger saves data on a 2 GB SD card. The owmeter can be congured to send emails periodically (such as once a day) with an attached CSV le. It can be programmed to generate an alarm email only if ow deviates from setpoint, eliminating the need for continuous monitoring, and reducing cellphone charges. The Proline Promag L800 uses three sets of size D lithium-thionyl chloride highpower batteries that last for 15 years. The owmeter is available in sizes from 2 inches to 24 inches, operates at pressures up to 232 psi, and works with liquids having a minimum conductivity 50 S/cm and a maximum ow rate of 33 ft/ sec. (www.us.endress.com/promag-400-800)

Inclusion in New Products does not imply endorsement by POWER magazine.


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POWER January 2013

Coal Combustion & Cofiring Biomass Guidebook


This guidebook exclusively features coal combustion coring biomass articles, including full charts, photographs, graphs and step-by-step instructions, previously featured in POWER magazine. Table of Contents:
How accurate primary airow measurements improve plant performance Research and development for future coal generation Coal-red generation cost and performance trends Apply the fundamentals to improve emissions performance Designing and upgrading plants to blend coal To optimize performance, begin at the pulverizer Dynamic classiers improve pulverizer performance and more Managing air to improve combustion ecienty Boiler optimization increases fuel exibility Finesing fuel neness Boiler tuning basics, part I Boiler tuning basics, part II Blueprint your pulberizer for improved performance Measuring coal pipe ow Air preheater eal upgrades renew plant eciency The better environmental option: dry ash conversion technology Long-term catalyst health care Catalyst regeneration: The business case Constructing Marylands rst permitted landll for coal combustion byproducts A burning concern: Combustible dust Proactive strategies for dealing with combustible dust Designing and maintaining steam coil air preheaters for reliability and eectiveness Biomass coring: another way to clean your coal OPG Charts move from coal to biomass Drax oers model for coring biomass Designing fuel systems for large biomass plants Biomass coring: A promising new generation option

Available in a PDF format. 128 pages.

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READER SERVICE NUMBER 209

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READER SERVICE NUMBER 210

BUYERS GUIDE LISTING:


Sound Technologies
310 Commerce Square, Michigan City, IN 46360 USA Phone: 2198792600 x3409 E-mail: s_schreeg@soundtech.us Website: http://www.soundtech.us Acoustics, Enclosures, Gas Turbine Exhaust Systems, Silencers, Silencers (heat recovery)
READER SERVICE NUMBER 213
January 2013 POWER

www.powermag.com

61

Marmaduke Surfaceblows Salty Technical Romances


Steve Elonka began chronicling the exploits of Marmaduke Surfaceblowa ctional six-foot-four marine engineer with a steel brush mustache and a foghorn voicein POWER in 1948, when he raised the wooden mast of the SS Asia Sun with the help of two cobras and a case of Sandpaper Gin. Surfaceblows simple solutions to seemingly intractable plant problems remain timeless. This anthology, rst published in 1979, highlights many of Marmadukes exploits that occurred during his early years (preWW I) through the 1960s. Surfaceblows knowledge comes from hands-on experience operating steam power plants and all manner of machinery. Later in the series a son, Guy Newcomen Surfaceblow, was introduced. He is a university-trained engineer who also has eld experience that gives him credibility when working with hard-boiled characters in the boonies. The characters name was coined from Marmaduke, a Scottish name, and Surfaceblow, which is the action of removing impurities from a steam boiler. In this book, available in a PDF download, you will nd all of Surfaceblows adventures consolidated into a single volume. Many of the stories were inspired by actual events. Available in a PDF format, 321 pages long.

Order your copy online at www.powermag.com/powerpress or call 888-707-5808.

20954

ADVERTISERS INDEX
Enter reader service numbers on the FREE Product Information Source card in this issue.
Reader Service Number Page
www.bibb-eac.com

Bibb Engineering . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13. . . . . . . . . . . . . . . . . . . .8 Burns & McDonnell . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5. . . . . . . . . . . . . . . . . . . .3


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Cutsforth Products . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15. . . . . . . . . . . . . . . . . . . .9


www.cutsforth.com

Enercon. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38. . . . . . . . . . . . . . . . . . .12


www.enercon.com

Fluor Corp . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21. . . . . . . . . . . . . . . . . . .11


www.fluor.com

Hitachi Power Systems . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Cover 3. . . . . . . . . . . . . . . . . . .13


www.hitachipowersystems.us

TIC / Kiewit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3. . . . . . . . . . . . . . . . . . . .2
www.tic-inc.com

Metalfab . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9. . . . . . . . . . . . . . . . . . . .5
www.metalfabinc.com

Nol-Tec Systems. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12. . . . . . . . . . . . . . . . . . . .7


www.nol-tec.com

Pentair Valves & Controls. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19. . . . . . . . . . . . . . . . . . .10


www.pentair.com

Rentech. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Cover 2. . . . . . . . . . . . . . . . . . . .1
www.rentechboilers.com

Shaw Group . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7. . . . . . . . . . . . . . . . . . . .4
www.shawgrp.com

SICK Sensor . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11. . . . . . . . . . . . . . . . . . . .6


www.sicknorthamerica.com

Westinghouse . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . CV4. . . . . . . . . . . . . . . . . . .14


www.westinghousenuclear.com

CLASSIFIED ADVERTISING
Pages 60-61. To place a classified ad, contact Diane Hammes, 512-250-9555, dianeh@powermag.com

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January 2013 POWER

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COMMENTARY

The Electric Power Industry: A Post-Election Assessment


By H. Sterling Burnett, PhD

ith the passing of the 2012 election, one is reminded of the saying, The more things change, the more they stay the same. This, of course, stems from the fact that President Obama was reelected and both the Senate and the House remain in control of the same parties that held power, Democrats and Republicans respectively, before the election. For at least the next two years, expect more of the same.

On the other end of the coal front, federal, state, and local governments are actively working to block ports expansion that would allow increased coal exports, while the Obama administration has taken steps to restrict mountaintop mining. New regulations are in the pipeline that will make coal plants even less viable.

Nuclear Nuclear power will see some modest growth in the medium term. Even with no new reactors being built during the past 20 years in the U.S., the nuclear power industry has a great deal to brag about. In 1980, the average nuclear plant operated at 58.5% of its rated capacity. Todays nuclear plants average more than 90% of capacity. Indeed, the increased electricity produced by existing nuclear plants since 1990 could power 26 cities the size of Boston. Nuclears improved performance, combined with a new generation of purportedly less-expensive reactors and renewed concerns about Americas energy security has brought nuclear power construction out of the postThree Mile Island mothballs. Still, the industry is only likely to grow as long as the federal government offers loan guarantees to back the construction of new reactors. At the moment, four new reactors at two existing sites are in various stages of construction and a fifth reactor that had been mothballed during construction in 1985 is being finished out. Twenty-two more are in various stages of the proposal and/or planning processes. Many of these, however, wont be built for two primary reasons: relatively high construction costs and low natural gas prices that have undermined the push for new nuclear power plants for the near future. In the push to fund core programs to reduce the deficit, loan guarantees, and other programs that have helped restart the industry will likely be reducedif theyre not zeroed out of the federal budget. Coal For coal, expect the bad news to keep on coming. In swing states where the war on coal directly competed for votes with the auto bailout, auto workers beat coal miners. The administrations take-away message is likely to be that there are no serious repercussions for continuing to wage an assault on the coal industry from mine mouth to power plant to port. There were few bright spots for the coal power industry during the Obama administrations first term. Every clean air regulation that was made stricter had a disproportionate impact on coal plants. These regulations combined with low natural gas prices have made new coal plants undesirable from a cost perspective. Both trends also have made a number of existing coal plants unprofitable to operate and, in light of natural gas as an alternative, too expensive to upgrade to meet stricter air standards.
64

Natural Gas Although with little encouragement from the Obama administration, the natural gas industry has boomed over the past six years as a result of the fracking revolution. This trend is likely to continue. President Obama needs the gas boom to continue because its key to the administrations claims that the U.S. is on the road to energy independence. Despite his need for the natural gas boom to continue, the president seems committed to making public lands less accessible for oil and gas development. In addition, the administration is threatening to raise costs to producers by instituting nationwide fracking disclosure regulations. States that desired more drilling transparency have shown themselves more than capable of instituting disclosure regulations. Federal regulations would be duplicative and unnecessarily reduce new production. Most fracking is carried out by relatively small independent operators. While the largest producers can afford the costs of the new regulations, many smaller operators cannot. As a result, less gas will be produced, and the president will strike the very segment of the economy that he has consistently claimed is the backbone of economic recoverysmall businesses. Having said this, the biggest threat to the fracking revolution is its own success. Large production increases have resulted in extremely low pricesgood for consumers, not so much for producers who are struggling to produce natural gas at a profit. If this continues, more and more gas wells will be shuttered and fewer new wells drilled until prices allow operators to cover the costs of construction and continuing operations with a profit thrown in. Congress In the end, although Senate Republicans are likely to offer a number of bills to expand off-shore drilling and expedite domestic production, few if any of these initiatives are likely to make it out of the Senate. And unless some Republicans cross party lines and support Senate Democratic energy legislation, gridlock will continue. This is bad news because it will leave energy policy to the whims of federal regulatory agencies. Legislation through regulation is almost always bad for the energy industry, but especially so under the current regime. H. Sterling Burnett, PhD (sterling.burnett@ncpa.org) is a senior fellow at the National Center for Policy Analysis in Dallas.
POWER January 2013

www.powermag.com

Power Generation Products ----------------------------------------------Environmental Control Solutions ----------------------------------------------After Market Services -----------------------------------------------

Looking for solutions to reduce emissions?


With over 30 years experience and many successful projects around the world, Hitachi is an industry leader in Air Quality Control Systems. Hitachis proven technologies include wet and dry scrubber technologies, NOx solutions, particulate control and mercury removal systems. Hitachi Air Quality Control Systems will signi cantly reduce emissions to comply with the recent U-MACT regulations and minimize capital investment and operating costs while increasing reliability and turndown. Ask Hitachi about its total environmental solutions.

HITACHI POWER SYSTEMS AMERICA, LTD.


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N O C O M PA N Y I S M O R E

Committed to Enhanced Nuclear Plant Safety


W E S T I N G H O U S E E L E C T R I C C O M PA N Y L L C

Westinghouse has services and technologies to make the worlds already safe nuclear plants both pressurized water reactors and boiling water reactors even safer. We provide products and services to help nuclear plants prepare for external events, address extended station blackout conditions, provide enhanced spent fuel pool protection and mitigate a severe accident. We built safety into the design of our AP1000 plant, which harnesses natural forces like gravity, convection and condensation to achieve passive safety system shutdown. During a station blackout, or loss of all electrical power, the AP1000 plants passive safety system shuts down the reactor automatically, with no need for human intervention for up to 72 hours. Safety is at the forefront of our plants operations Westinghouse is committed to helping provide safe, clean and reliable electricity. Check out our solutions for enhancing safety at www.westinghousenuclear.com

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