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Renewables or Lost Jobs?

January 16, 2017
California, economy, energy, engineering, Environment, finance, innovation, Leadership, local government, management, power, Responsibility, water sewer management
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As 2017 gets rolling, we are set to swear in a new President.  The politics are already interesting.  The question is what will change, when and how.  For example there has been an ongoing discussion of infrastructure bills, but aside from WITAF approval, little clear direction has been forthcoming.  We only know that private sector participation will be encouraged.  Of course virtually all projects constructed in the public sector are constructed by private contractors, so how/if that will change is unclear.

It is also unclear which industries will be affected.  There are already comments about not pursuing he renewable energy opportunities  – China sees 13 million jobs in the coming 5 years as their economy cranks up to meet the needs.  They are contributing $360 billion to enhance this sector.  I have previously blogged about potential opportunities in the US to grow renewables.  But they are just like recycling in the 1970s.  Recycling needed to be subsidized until such time as the facilities and processes were in place to make it competitive.  Now for steel and aluminum, it is less costly than virgin iron or bauxite.  That has several benefits to the economy and the environment.

I have previously suggested that those who do the research, develop the solutions and control the patents tend to rule the economy.  The US did in throughout the 20th century.  Energy is the 21st century opportunity and I would hope we don’t cede that elsewhere due to politics.  13 million jobs would really help places in rural America and place like Detroit and Flint which have the workers.  It may be that instead of the federal government doing much in this arena, the state and local officials will lead the charge.  California has been successful to a degree in this regard.  Let’s see if making money will “trump” the politics of oil. That would be good for a lot of local governments that have workers and factories, but not jobs.  That would help people like those in Flint.  And it would help their utilities.  Let’s work on this with our local officials

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Future trends we might need to think about

April 21, 2016
agriculture, Climate, economy, ecosystem, energy, Environment, finance, Flooding, growth, Holistic Water Planning, infrastructure, innovation, Leadership, local government, management, planning, politics, pollution, population growth, power demands, power-water nexus, Responsibility, sea level rise, sustainability, utilities, water sewer management, water supplies
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Fred+Bloetscher+Senate+Committee+Holds+Hearing+cQCSwINqgm3l

Water and wastewater utilities spend a lot of time dealing with current issues =- putting out “fires.”  But there are larger trends that will affect the industry.  Here are a couple recent topics that we should consider in our industry:

Will robots be doing all our repetitive jobs?  If so what does that mean for all the people doing those jobs now.  Most do not require a lot of skills, and many of those in the jobs that will be lost, do not have the skills for other jobs?  Does the $15 per hour minimum wage accelerate this transition?  How does this affect the water industry?  Meter readers might be replaced with AMR systems.  Customer service is already migrating to direct banking.  There is a change coming.

What does the driverless car mean for us?  I am thinking about an old Arnold Schwartzenegger movie.  For utilities the issue may be how we interact with unmanned vehicles, especially when what we do can be disruptive to traffic.  What happens if those cars get into an accident?  And Warren Buffett is thinking about the impact of this on the insurance industry.  He owns a lot of GEICO stock.  It is doubtful many utility vehicles will be unmanned, in the near-term, but do our manned vehicles and the potential disruption leave us open to greater risk of loss?

Speaking of Warren Buffett says the economy is far better than certain candidates suggest.  I tend to trust Mr. Buffett.  He’s been doing this a long time and has been fabulously successful.  But he notes structural changes to the economy like those noted above, are ongoing.  That will create conflict for certain professions that migrate to automation, much as manufacturing did in the 1970s.  He raises concern about what happens to those workers and suggests that we have not planned enough for those workers who get displaced as the economy undergoes continuing transitions.  In the late 1970s we had CETA and other jobs training programs as we moved from manufacturing to other jobs.  He does not see that in place now.  The at-risk – the poor, minorities, the less educated, rural citizens…. in other words, the usual groups will be hit harder than the rest of the population.  I don’t hear that discussion on the campaign trail but utilities may want to follow these trends is the hope that we can acquire some of the skillsets that we need.  Or provide that training.

Florida’s flood protection plan received a C- from a study called States at Risk.  It said Florida lacks a long term plan for rising seas, despite being vulnerable.  On an unrelated note, the state is expecting insurance premiums to increase 25% or more for flood insurance for homeowners.  And local officials are working busily on FEMA maps to exclude as many properties as possible from flood insurance requirements.  Maybe those things are all related, just at opposite purposes, but who is going to get the calls when flooding occurs?  Storm water utilities, and sewer systems where the manholes are opened to “facilitate drainage.”  The question is what the ratings are for other states as Florida was not the least prepared nor is it the only state with exposure.

A final current trend to think about is this:  Current sea level rise projections have increase the high end, but remained steady for the 50 percentile case.  By 2200 we may see seas at 10 ft higher. That would be a major problem for south Florida.  But the world population will be over 15 billion, which exceeds the carrying capacity of agriculture (at present projections and techniques).  It also places over half the world in water limited areas.  So sea level rise is going to be huge in south Florida, but will concern be localized because of more pressing issues?   Is the number of people going to be our biggest issue in 2200?  Note both will be critical for a large portion of those 15 billion people, but the solution to either is…..?

 

Gulf Power Grids

August 15, 2015
energy, Leadership, politics, water sewer management
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As storm season arrives, I found an interesting figure which comes from Power magazine and shows all the power stations that are at risk from storms.  That’s a lot of power.  The question is how do we address this?  Water and wastewater utilities are actively looking for means to reduce power costs.  Pumping water can account for 80-90 percent of total power consumption, especially with high service pumps.

Water and wastewater power plants tend to have backup power.  Or at least we hope they do.  In Florida we created FLAWarn after the hurricanes in 2005.  The concept was to put utilities together to allow them to share generators and other assets in case of emergency.  Many utilities here have generators at pump stations, tanks and on trailers.  The goal is to insure service can be provided regardless of the damage.  And that did come in handy after Wilma in 2006.  FLAWarn serves as a model for other states.

There are also renewable power which some utilities have invested in.  Renewable power on plant sites is a means to address the potential grid interruptions.  This solution, however, may not be embraced by power utilities due to the potential revenue reduction. As the water facility takes on on-site generation, the utility load profile may shift significantly placing them in under a different rate structure which may greatly reduce the benefit to the utility.  One problem.

Also there are some at work to derail green power solutions, trying to reduce the attractiveness and subsidies on renewable power.  Interesting that many power providers are not in that group because all power in the US is subsidized – oil, gas and renewables.  The oil and gas sector is much larger and while many renewable power solutions are used by large power entities.   In some states, the states have taken action to encourage these investments because of the potential benefits to the population.  Local entities have gotten involved also.  It just makes sense if you are in the right region and the price/risk ratio is right.  A number of water and sewer utilities have pursued this option successfully.  That will help as well during outages.

Now if we can keep the trees from being planted above the pipelines ….power systems

Drought!

March 14, 2015
California, direct potable reuse, Drought, Dust Bowl, energy, indirect potable reuse, innovation, Risk, sustainability
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The number of people that recall the Dust Bowl of the 1930s is dwindling and that may portend poorly for society (likewise the loss of Depression memories and two world wars).  The Dust Bowl was aptly names for the regular storms of windblown dust that pummeled farm fields and blew away valuable topsoil needed by farmers.  Why it occurred was more interesting and foretelling.

The amount of farming had exploded in the late 1920s as a result of  record wheat price, motorized tractors and government programs encouraging farmers to plow up the prairie and plant.  The crops replacing the native plants did not have the same root structure and were less drought tolerant as a result.  When wheat prices collapsed, the fields were left fallow exposing the topsoil to the elements.  Since the topsoil was no longer anchored to the soil by plants, the wind and lack of rain caused much of the topsoil to migrate with the wind as dust.  Topsoil was lost, rain ran off, transpiration decreased, and the cycle just go worse.   Up to 75% of he topsoil was lost.

Rains returned in the 1940s but much of the dry farming (no irrigation) practice was immediately converted to wet framing using deep wells to capture water from aquifers.  The result was healthier crops, more consistent yields and protection of the remaining topsoil as a result.  Or is it?

Visit California today.  They are in the midst of severe drought conditions. Farmers have attempted to protect themselves by drilling more wells – deeper wells which diminish water supplies to the shallower neighboring wells.  Water levels decline, land subsides, the aquifer collapses, and there is little recharge.  Some areas of the central valley have sunk over 8 feet in the past 100 years.  But we have up until this point, had healthier crops and more productive yields, which protects the valley until the rains return.  Or does it?

While the lack of rainfall is a natural cycle, there is an argument to be made that man-made impacts have exacerbated the situation.  In the Dust Bowl states, the initial error was plowing up the native grasses without understanding how they had adapted to the mostly dry conditions on the prairie.  Many of the prairie states receive under 20 inches or rain each year, and scarcely any during the summer, which limited evapotranspiration, which limits thunderstorm and regional rainfall activity.  Less ET = drier conditions.  So growing crops is not what one would immediately identify and a “normal” land use for the prairie.  We altered the environment, but the Midwestern farming thought process doesn’t work in the dry prairie.  Irrigation was needed, but the lack of surface water limited irrigation unless wells are used.  Wells were drilled which returned and improved crop yields, but the well use has caused massive decreases in aquifer levels in the prairie states. The amount of water is finite, so as long as withdrawal exceed recharge, and with only 20 inches of rain that mostly runs off the land, there is a point in time when the well runs dry.  As the well runs drier, productivity will fall.  The interim fix is drill deeper, but the bottom of the aquifer is in sight.  Then, fields will be fallow, agriculture will be impacted dramatically, and it is not inconceivable the Dust Bowl type conditions could reoccur. Policies by man exacerbate the problem because the prairie productivity is accelerated will above its natural condition.

Likewise much of the land subsidence problem in California is irrigation driven – water is pulled through wells in an ever increasing competition to maintain one’s crop yield.  Water wars and fights with one’s neighbors over wells drying up is increasing more common as irrigation needs increase and recharge to the aquifer is diminished.  Much of California is even drier than the Dust Bowl states, and more reliant or wells and irrigation.  Less water also means less ET which means less local rainfall.  So while California has done much to protect itself over the years from drought, the current experience says that declining aquifer levels means we have exceeded the productivity of that state as well.  So is the California Dust Bowl coming?

Man is an ingenious creature.  We overcome much that the Earth throws at us.  But at the same time, we rarely consider the consequences of our actions in overcoming the challenges Earth poses.  These two examples show how our efforts to solve one problem, may actually damage the long term sustainability of these areas.  Short term gain, long term problem.

Low Gas Prices = Bad Budgets

March 10, 2015
Economic Bubbles, economy, energy, finance, growth, infrastructure, innovation, Leadership, planning, power, power demands, power-water nexus
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Interesting that while we all love low gas prices and the low cost of energy is fueling an expansion of our economy, including the first gains in middle income salaries since 2008, the states reliant on oil and gas may be facing real problems financially.  A year ago I read an article that noted the reluctance of North Dakota residents and politicians to invest in roads and other infrastructure despite the influx of oil money.  Keep taxes low was the mantra.  SO they did.  A recent Governing magazine article notes that a dollar drop in oil means $7.5 million decrease in revenues for the State of New Mexico.  Since oil has lost about $30 a barrel in the past year – that is $200 million loss.  Louisiana sees a $12 million cost/dollar drop so they have $171 billion less to work with.  Alaska, perhaps the most oil dependent budget (90 percent) has a $3.4 billion shortfall, but $14.7 billion in revenues.  Texas, North Dakota, Oklahoma and Kansas are other states facing losses.  Fast growing states like North Dakota and Wyoming now have hard decisions to make.  Growth in Texas, Oklahoma, Louisiana and Arkansas may be cut by 2/3 of prior estimates as a result.  A double hit on anticipated revenues.

The comparison is interesting financial straights experienced by the “property value” states like Florida, Nevada and Arizona before and after the economic collapse in 2008.  Florida politicians couldn’t wait to cut taxes and slow spending during boom years, then got caught badly after the 2008 recession when property values dropped in half and state sales tax revenues (tourism) dropped steeply.  They ran out of reserves and refused to raise taxes (after cutting them), so cut things like education and health care to balance the budget.  Not sure how either helped low and middle class Floridians get back on track since Florida has primarily create low wage jobs since that time, not high paying jobs.  We are paying the price still.  I am guessing Nevada and Arizona are similar.

We clearly have not learned the lessons of the many mill towns in the south or the rust belt cities of the Midwest that encountered difficulties when those economies collapsed. Everyone refused to believe the good times would end.  Now Detroit is half of its former self and Akron has the same population as it did on 1910.

The moral of the story is that booms great, but short term.  Diversity in the economy is a key.  Florida will continue to be subject to economic downturns more severe than other states when it relies primarily on tourism and retirees to fuel the economy.  Detroit relied on automobiles, Akron rubber and chemicals, Cleveland steel, etc.  Some day the Silicon Valley will suffer when the next generation of technology occurs that makes the current works obsolete.  It is what happens when you are a “one economy” town.  It is also what happens when you believe the booms are “normal” and fail to financially plan by putting money aside during the boom to soften the subsequent period.

An argument could be made that if the federal government had not enacted tax cuts in 2000 when the budget was finally balanced and surpluses were presumed to loom ahead, we could have banked that money (or bought down our debts), and the amount of borrowing would have been less in 2008.  Buying down debt when times are good is good business.  So is putting money in reserve.  The question is why the politicians do not understand it.  We can run government like a business financially, but takes leadership to do it.  It takes leadership to explain why reserves are good and tax cuts are a future problem.  It takes leadership to make hard decisions like raising taxes, spending more on infrastructure, requiring people to move out of flood plains, not rebuilding in vulnerable areas, and curtaining water use policies when they damage society.  Leadership is making decisions that help the needs of the many, versus the needs of the few.  Oh wait, I see the issue now.  We need Spock to lead us…

 

Musings on the Energy Front

March 6, 2015
American Water Works Association, economy, energy, fracking, Greenhouse gas emissins, innovation, JObs, Leadership, power, power demands, power-water nexus, resource depletion, solar power, wind power
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Power costs are stable.  Gas prices decreased markedly in 2014 Oil futures are low compared to 2013 and earlier.  .  Production is constant.  Low energy likely is fueling an economic expansion.  Gas economy in vehicles is at an all-time high.  Fuel efficiency lowers GHGs and cuts oil imports.  America is less reliant on foreign oil.  We have more money in our pockets.  Utility power costs and vehicle costs are lower.  Generator operations are lower.  Life is great.  Or is it?

 

Well, that depends on who you talk to.  Politicians in states with in oil and gas based economies are scrambling to deal with large deficits in their budgets.  The railroads are not happy over the Keystone pipeline vote.  Green energy manufacturer are unhappy.  Environmentalists are unhappy.    Heck even the Koch brothers are probably not completely happy

 

The first issue is methane gas.  Pipelines and fracking operations lose about 6% of the gas. A Washington Post article estimates 8 million metric tons of methane is lost each year.  That is where we are trying to capture and transport it.  The Bakken fields lack pipelines for gas, so much if it may be flared.  The amount of fracking will continue (Florida Power and Light has said it will get into the business – but outside of Florida), so more exploration will likely lead to more methane escaping.  Why do we care?  Methane is 22 to 80 times the greenhouse gas that carbon dioxide it (depending on who you talk to).  It accounts for 9% of GHG emission in the US – a third of that from the oil and gas industry.  That gas is concentrated in the western US which makes them ripe for regulation.

 

Enter cap and trade.  The cap and trade “industry” has been opposed by the oil and gas industry for years.  However there are a number of groups –from Indian tribes to NextEra Energy are posed to benefit from cap and trade (C&T) rules.   They have reduced their carbon footprint enough that they can sell carbon credits.  It is doubtful that this Congress with pass C&T legislation, but much of the regulatory focus could be shifted if C&T was in place.  C&T could accelerate green energy efforts.

 

Green energy folks want continued subsides or policies that encourage increased green power supplies, improve technology and reduce prices – all at the same time.  Rolling out a major change in the energy picture is a huge investment that will not gain traction without policies to encourage it   At least for now, green energy creates more jobs per KW-hr than conventional oil and gas, primarily in research and development and product manufacturing.  Sewing up the patents would portend positively for America in the 21st century, much as sewing up the car, gas engine, and nuclear patents did for the 20th century.  He who owns the technology should benefit.  Unfortunately that isn’t the Koch brothers who are unhappy with green energy but are happy that lower oil prices might decrease the competition in the future when oil prices inevitably rise.  But America would be better off in a non-oil based economy in 50 years if we developed an energy policy to address these issues with a long-term view.

 

However, that would take a lot of business and political leadership to overcome some of those who do not want change.  These are people who have more money than the Concord coach makers who could not fight the technology change to automobiles in the early 20th century.  It also takes a vision of what America should look like in 50 years. We might be short on those visionaries.  And how will utilities be a part of it.

POWER PLAYS – Subsidies and water utilities

August 2, 2014
Climate, energy, Environment, fracking, infrastructure, innovation, power, power demands, power-water nexus, sustainability, Uncategorized, water sewer management, wind power
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So what does this mean for water and sewer utilities. First, we’d love to stay out of the fray. Water and sewer utilities recognize that they are the “peak” power supply for electric utilities. The means to expand power supplies is made difficult by the rules for capital recovery for power utilities that penalizes peak and redundant power supply construction. It must be used and useful to qualify for a return. Hence NextEra builds inexpensive, small increment renewable wind systems to be made whole and encourages residents to reduce demands so they do not need to build more large scale capacity. That works as long as access to renewables or increases in efficiency are available. The use of federal subsidies encourages the used of new technology but without the subsidies, expect the construction to slow.

The European Union is looking to phase out renewable power subsidies by 2017, which may have fairly significant consequences for the European renewable market. The Koch brothers and the Tea Party operatives they fund through many organizations like the Institute for Energy Research, Americans for Prosperity and the Heritage Foundation, are fighting federal tax credits for wind, while backing tax credits for oil and gas. Why do the Koch brothers keep showing up? Because as we noted in a prior blog – they stand to lose profits if the US depends less on oil and gas IT si a problem with big money interests using that money for self preservation as opposed to progression of technology and ideas.

Think what would have happened 100 years ago if big money was allowed to control progress. And I have just the perfect scenario pitting two sides of my family. My mother’s great uncle made Concord coaches. As long as horse drawn carriages and coaches were the primary transportation options, they made money. OF course many cities and towns found that they spend much of their tax money cleaning up after the horses, one of the all-time yuckiest jobs. Tons of horse poop was cleaned up nightly on the streets on many cities. Images are available on line. Of course there was also the stench, disease, vectors, etc associated with all that poop.

Then came Henry Ford. My Dad’s side of the family were Detroiters. They got jobs in the Ford factories, and made money from services to autoworkers as well. The cities loved having cars – less poop. In fact Henry’s cars worked so well, that very quickly cities didn’t have to pick up poop. And the stench and disease decreased. Of course back then, my mothers’ family did not have the same means to buy influence to prevent Henry Ford from producing cars. My uncle went broke, but America and my father’s family in Detroit, benefitted greatly as a result of the new technology. I think we all benefitted from the automobile. Thankfully the coachmakers didn’t have money.

Using politics and influence to resist new technology seems unAmerican. Using subsidies to encourage is seems far more beneficial to society as long as those subsidies actually benefit society. Subsidies have long been a means for governments to alter consumer and corporate behavior and encourage new technologies. Subsidies for recycling steel, aluminum, glass, paper and other materials remained in place until the technology was cost effective to compete with new materials. Now recovered steel is cheaper than new steel materials. The subsidies had their effect. The same is true with aluminum and glass. Subsidies in the form of grants encouraged water and sewer utilities to upgrade treatment and install pipes to serve new customers. Now those are low interest loans because most of the cost effective connections have been made. It benefitted society.

Subsides have been used for years in the US and Europe to encourage renewable power use. The result is a reduction in renewable costs as more people invested in the technology. Greater supply means lower costs (economy of scale, and, theory of economic supply and demand), and subsides are designed to reduce purchase prices sooner than the market might otherwise. Otherwise most of these industries never get off the ground because they cannot get to cost effective production levels. Stay tuned.

POWER PLAYS Part 2 Water and Power

July 30, 2014
Climate, energy, fracking, Greenhouse gas emissins, hydroelectric power, infrastructure, power, power demands, power-water nexus, Uncategorized
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Water limitations are a problem in many areas of the US and the world. Without water, the efficiency of power plants diminishes as the folks in Washington and California have found out when converting to air cooling their facilities. Losses can be 30% of output which makes that investment in upgrading to 40% efficiency, drop back to 30. Not a good investment, unless you have no option. In water limited places in the world, cooling water will limit the ability to use water-intensive coal, nuclear and oil facilities.

Nuclear power has been argued as a green option, but it is green only with respect to carbon production. Nuclear needs copious amount of water to cool the reactor. An while it remains an ongoing option, many are wary after the Japanese experience. There are 6 licenses in the US for nuclear facilities that expire by 2020, and 27 more by 2030. That means over a third of facilities are at their useful life. Creating second generation nuclear plants is a major, challenge at a financial and political level. For the most part China, Russia and India are leading the way with the US a distant 5th in proposed next generation reactors. We just don’t see a lot of nuclear reactors on the US horizon. Why? Renewable and gas.

The power generation picture has changed significantly in 10 years with respect to large increases in wind and gas. Renewables have increased from 2.4 to 6.5% of the market in 10 years (to 266 TWh). Wind has been the largest growth area (to 167 TWh) despite ongoing environmental issues associated with migratory birds, minimum wind speeds, and lobbying against wind projects (like Bill Koch did in Cape Cod) or the tax incentives used for renewables (like the Koch brothers continue to do along with Tea Party members in Texas). Wind energy costs have dropped by 40% in 10 years and today the majority of wind energy components are built in the US as opposed to overseas. The subsidies have made this possible by limited private capital risk. Nolan County, Texas alone produced more wind than the state of California, despite the ongoing lobbying against it in Texas. Texas has the largest “wind” reserves in the US and many in the public see the need to take advantage of the high wind areas like Texas ($25 billion to date, $13 billion proposed), the Rocky Mountains and coastal areas that do not conflict with migratory birds routes, landscape views or property rights issues. The Blackfeet Nation in Montana has long known that wind is a valuable resource on the reservation. Overall the state of Montana has the second largest wind potential behind Texas. But like Texas there is conflict – in Montana from the fracking industry. Note that the upper Rocky Mountains is where NextEra installs many of its wind fields. California has also gotten into the wind market with projects proposed in the Mojave Desert, although eagle conflicts impact those permits. However, uncertainty about the ongoing tax break , caused by inaction in the House, caused new wind projects to drop 92%, with a loss of 30,000 jobs in one year which creates questions about wind power expansion in the near future.

At the smaller level, combined heat and power (CHP) generation is located at 4200 commercial and industrial facilities today. States are interested. The demand is expected to rise to 40 GW by 2020. Solar markets are often local. Some communities provide incentives for residents to put panels on the roofs. Germany did this and now 25% of their power comes from these solar projects. 2% of houses in Arizona have solar on their roofs. In Hawaii, solar power is half the cost of generated power. However local solar has run into the same issue as wind power – this time the Koch brothers-funded American Legislative Exchange Council has encouraged local power utilities in 21 states to challenge laws that permit solar installations of houses as reducing profitability of power investments by those utilities. Others, like FPL still fund such installations creating and interesting conflict in the market.

Gas has replaced coal as the dominant source, both because of less greenhouse gases and because of much higher efficiency in source-power ratios. California, Texas, Florida and New York, among the four largest power demanding states, have seen natural gas use increase significantly in the past 20 years, virtually all at the expense of coal. Fracking has been the primary reason for the expansion of gas. High quality gas can be recovered from areas through horizontal drilling, but only 3-5% of the gas in the foundation is actually removed from the initial frack. Then the returns diminish to about 10-15% of initial withdrawal within 1-3 years, and refracking must occur to increase production. 100% of the gas is unlikely to ever be achievable. Still gas reserves are likely to be producers for some time, although industry experts expect the peak of current fracking technology in 2025, much sooner than some would hope. Despite there being over 2.4 million miles of gas pipelines in the US, the biggest issue with frack gas is pipeline absence in the big fields in Pennsylvania, Ohio and North Dakota. Refineries are starting to crop up in the Midwest and Pennsylvania to address the gas needs – which may reduce the need for longer pipelines and reduce loss (currently 6%).

Fracking is also a boon to the oil industry and the ability to recovery oil from tar sands in Alberta has increased the potential supply. Like gas, the problem is pipelines, but the lack of pipelines is a boon to the railroad industry, particularly in the Bakken Fields in North Dakota where abundant rail is available via BNSF (hence Warren Buffett bought it). Tank car demands are up to meet the 400,000 tank car loads of crude oil transported in 2013. Demands are expected to climb as new generation tank cars are built to minimize risks of hauling crude oil and coal tar sand products. Tight oil recovery is expected to rise through 2019, while a slow decrease is expected thereafter based on current technology. But note the lack of pipelines create a problem in getting the gas from North Dakota to useful markets. It is estimated that $1 billion per year in gas is flared in the Bakken fields alone. Pipelines and rail are needed, but both are controversial

The pipeline solution is varied and many. North American Oil and Gas Pipelines magazine sees a high investment in pipelines by 2020, with decreasing investments through 2035 as gas recovery drops. XL pipeline has dominated smaller pipeline projects designed to bring tar sands oil to refineries in Texas and Louisiana, but there are other spurs and different pipes are planned for different purposes. The obstacles are many – political, environmental, economic through a host of forces that either benefit directly from the pipelines or that benefit from not having the pipelines (think railroads). Of course a couple of recent rail accidents have created more controversy there, but rail is the current solution for many of these remote fields.

POWER PLAYS

July 26, 2014
Congress, Development loans, Economic Bubbles, economy, energy, Environment, hydroelectric power, infrastructure, Leadership, power, power demands, power-water nexus, Rural Utilities, utilities, Water Funding, water quality, water sewer management
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In this blog we are going to talk about trends in the power industry and how they may affect utilities.  One of the ongoing themes of this blog is that to be leaders in the field, we need to be cognizant of what others are doing and how those actions might affect utility operations.  Power is a big cost for utilities – often 10-15% of the total operations costs where a lot of pumping is involved. In most communities, the utility system is among the largest consumers of power, which is why many utilities have load control agreements in place – power companies can off-load power demands by having the utilities go to onsite generators.  Our community’s building account for 70% or more of local energy use.

The need for power is expanding, albeit at a lower rate that population growth in many communities.  This is because new building construction measures tend to insulate better and install more energy efficient equipment.  Power companies often will subsidize these improvements to reduce the need for more expensive plant expansions.  Where expansions are needed, purchase/transfer agreements or renewables are often a convenient answer.

But long-term we are seeing that the power industry is changing in other ways too.  Already we see a migration away from coal for power generation.  This was occurring before the new regulations were in place for carbon dioxide.  Certain utility companies like NextEra, the largest wind and solar power generator in the US, and the parent of Florida Power and Light, have reduced greenhouse gas emissions from their plants by converting to other sources like combined heat and power (CHP), and increasing efficiency.  The typical oil or coal power plant is 30-35% efficient, while the newer gas turbine systems are up to 45% efficient.  That makes a big difference in costs as well as emissions when gas emissions are half the coal and oil emissions.  NextEra is well placed for carbon trading, a concept some fight, but the US had been emission trading since the early 1990s, so carbon trading markets are already in place.  The only thing needed is the regulations to put them into play.  Buy that NextEra stock now and hope for carbon trading!

But NextEra is not the only likely winner under this carbon trading scenario.  ExxonMobile is big into gas, Exelon is big in the nuclear power industry, Siemens and General Electric, which make wind and gas turbines, are also likely to see growth.  All have poised themselves years ago as the impact of carbon dioxide becomes more apparent.  Most of the industry executives acknowledge climate issues and recognize that people will expect the industry to do its part (the Koch brothers aside).  Many power generators like ConEd and FPL are making changes as well, in advance of the regulatory requirements to do so.  They see it as good business.  They also see it as a means to make more power at a given facility (by increasing efficiency) while reducing water use.  Water use can be a limiting factor, so we will discuss that in a couple days…

 

 

BOOMS AND BUSTS IN RURAL AMERICA

June 5, 2014
communciations, Economic Bubbles, economy, energy, fracking, infrastructure, Leadership, local government, management, planning, politics, power, Rural Utilities, Uncategorized, underwriters, utilities
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In a prior blog we talked about the difference between urban and rural counties and the impact of the differences between incomes and how that would affect utilities.  Keep in mind that the 40 largest urban counties in the US contain nearly half the US population as do the 50 largest utilities.  So in a recent article in Governing, the focus was on the few counties where income was higher than average.  In fact, in looking at counties, within the top 20 in per capita income are 10 counties in North and South Dakota.  Interesting until you review why.  All are in areas where fracking is ongoing and corporate farming is prevelant.  It is no surprise that the fracking boom has created wealth in rural areas that have limited populations, limited regulations and state and local officials who are desperate to reduce unemployment and stimulate laggard economies.  We noted before that rural counties are often desperate for jobs, so they often ignore what could possibly go wrong when jobs and development are the only priorities for a community.  Governing used the example of Wells County, ND where the per capita income has doubled since 1997 and is 75% above the national average.  Yet the local governments are looking at which roads they will allow to go back to gravel.  How is this possible? 

The issue is not relegated to just Wells, ND.  Despite the fact that many rural communities in areas with intensive farming or fracking have grown 10-15% since 2007, local officials are finding it difficult to raise taxes to pay for infrastructure.  Roads are the most obvious and pressing issue because of the impact from fracking traffic.  As new wells are constructed, the frackers build new dirt roads and use the existing roadways.  Some believe the need to fix many of the roads is temporary so why bother, but it neglects the need to infrastructure improvements in general.  The same argument could be used for water and sewer infrastructure as well, but these wealthy rural communities do not want to increase governmental spending to improve any infrastructure, so the opportunity to address the community needs is being lost.  

What is more interesting is that the states where these rural counties exist, including the Dakotas, along with Montana, Wyoming, New Mexico, and most of the southeastern states are among the states that rely most heavily on federal funding.  So when incomes increase, the dependency remains.  These are the same states that tax residents the least, spend the least on education, have the poorest health care (and the fewest people signed up for the Affordable Care Act and few have state exchanges) and have the most people in poverty.  The dichotomy between reality and the political perception is interesting in these states, which leads one to wonder if the residents of these states like their situation and keep electing representatives that reflect this desire, or they have fallen victim to political interests that cause them to vote consistently against their better interests, or for the interests of a limited few that deny them access to the education, infrastructure, medical care and other benefits their urban and wealthier neighbors enjoy. 

That is a tough question but the bigger question is how to infrastructure agencies like utilities attempt to overcome either of these perceptions?  Neglecting infrastructure, education, medical and the like does not promote local economies, does not create jobs and more likely causes the migration of the best and brightest young people out of the community in search of better prospects, which further imperils their rural situation.  Keep in mind that most cities are relatively permanent, but fracking, like mining, oil and timber before them, have been booms and busts.  The situation if far more dire after the boomtown than it was before.  After all, what could possibly go wrong when 50,000 miners, or frackers, descend upon a community of 1,500 people?  They will consume all the resources, then leave.  Locally those well paying jobs are imported due to the lack of skills and education, and then they leave with the bust.  This has played out many times in the past.  It is not sustainable.  We need to learn from the past – when the boom hits, make the investments you need in infrastructure, education, medicine, etc. so that the future is better after the bust. 

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