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Notes from Energy Conference - Richard Moeller

September 25, 2010 – Comments (0) | RELATED TICKERS: SMRT , GRID

Richard Moeller – Commissioner of FERC

Opening statement regarding global energy subsidies:

In 2008 oil and natural gas prices were at all-time highs.  Normally, when the prices of products increase, the demand will sharply decrease.  However, in India the government continued to provide heavy subsidies for oil and gas.  This didn’t curb the demand for energy in India and people in India continued to use large amounts of energy – unchecked. 

This threw off the world markets because India is such a large country and uses so much oil and gas.  While the Indian government was criticized for this, their response was simple: even with 500MM people using lots of oil and gas, we still have 500MM people that are unable to use oil and gas because it was still too expensive.  If we fail to subsidize energy prices, millions of people in our country would simply go without power.  It’s going to be an ongoing international struggle.

What does FERC do? 

FERC aids in the connection of power plants – coal, nuclear, wind, solar or any combination of these – to the power grid. 

Exploring Our Options 

Coal remains incredibly costly to the environment because of the amount of excavation that is required, and is also dangerous (see W. Virginia and Chile). 

There is a revolution going on in the natural gas industry.  Technology has allowed us to use directional drilling, which can tap shale gas reserves that we previously thought were unable to be reached.  This isn’t to say that it doesn't come with environmental ramifications, though.  Frac’ing has previously led to groundwater contamination, which can ultimately lead to the contamination of drinking water.  YouTube clips exist of people who can light their tap water on fire because at times there is a very high percentage of dissolved natural gas in the water.  This problem is prominent in PA.  Nonetheless, natural gas seems to be a good answer for energy demand issues.

Wind energy has grown very rapidly and has created a lot of hype in the past decade.  However, tying in wind energy to the grid creates problems.  The grid operates in a “steady-state” like method, and the grid stays at 60 Hz.  Wind is not a consistent form of energy, it comes and goes, and we currently don’t have great options for energy storage.  Fluctuations in the grid inhibit the steady-state like operations that operators need to provide consistent energy.  The same is true of solar energy.  So not only are these options of energy economically challenging from a cost per kWh perspective, they also create operational problems as well.  As these types of energy continue to expand and provide more power, it causes the swings in energy output, from the grid perspective, to become even greater, rather than smooth them out.

How do we utilize all sources of energy more efficiently? 

We need more energy transmission – means of carrying electrons from the generation site to the customer that uses it.  This is difficult, though.  From an intuitive stance, it would make sense that you would put lots of solar panels in Arizona, and simply export the energy to nearby states.  This is not that simple, though.  States can block interstate gas and electric transmissions.  It’s also difficult from a costing stance.  How do you split up the costs when one state generates electricity while another state imports electricity?  While its simply interstate commerce, its interstate commerce at the highest difficulty level.

The smart grid provides the greatest potential for the US.  It would make all sources of electricity much more efficiently used, reducing wastage of electricity.  This is not an easy task, though.  It will take decades to be able to implement an efficient smart grid.  What would it allow?  It would allow operators to be able to see energy use in real-time, adjusting power flows from where it isn’t needed to where it is needed.  It could direct the highest areas of power generation at a given time to the customers who need it the most, at that time. 

Also, what if people could manage their power use on an individual basis?  What if people could choose to use power at off peak hours, when there is little demand, so that power wouldn’t simply go to waste?  There should not be flat rates for power.  There should be an open market on power so that supply and demand could determine a fair market price.  We should pay more for power during the hot summer months, and more during the middle of the day.  A smart grid could provide this type of flexibility to the consumers.  (DC is actually making progress toward making this happen.)

How do we set a "free-market" price on energy? 

This leads back to the problem of India providing subsidies for energy.  How are the free markets supposed to set a price on energy when there are international subsidies?  What other problems do subsidies cause?  They are one of the primary causes behind the inhibition of Cleantech energy sources.  Subsidies continue to keep the cost of current technologies so cheap from a kWh perspective.  India still has the same problem, though.  If we let energy prices get to where they should theoretically be from a supply-demand stance, what about all of the people that won’t be able to afford it (this wouldn't just be people in India, it would include people in the US)?  If Cleantech succeeds, it will most likely be due to more expensive energy.

Subsidies aren’t sustainable, though.  Eventually free markets will be the future for energy, and Cleantech will be a viable option.  But even if we remove subsidies from the equation, there are still hurdles that rest in the way from a global perspective.  Look at carbon markets, for instance.  If the US implemented a market for carbon, and no other countries followed suit, the US would simply be inhibiting economic growth for absolutely no positive environmental reason.  Atmospheric carbon dioxide concentrations are in equilibrium globally.  If we implemented a carbon market, it wouldn’t make a difference globally.  We would need all major players from an energy use perspective to get on board for this to work.  Energy markets are not universal – not from a country to country scale, nor from a state to state scale.  But a smart grid would be a step in the right direction.  It will just take lots of time (and money) to implement.

I also have some notes from some other people other than Moeller from the conference.  If you guys like this, I'll post up those notes, too.