In the aftermath of the tragic events of 11 September we seem to be stumbling into a new era. But the ramifications for business in general, and for the energy business in particular, are, as yet, difficult to discern. As usual our faltering attempts to anticipate the future have been overtaken, indeed overturned, by unexpected events. For the power business, the kinds of issues that are likely to be to the fore in the coming months are security, diversity, and self-sufficiency.
Although the environment is perhaps the last thing on your mind when you are contemplating the prospect of war and recession, the cause of small-scale renewables could well be strengthened in the longer term. This is because tend to be localised and distributed, and appear less vulnerable to fuel supply disruption, market instabilities and the threat of global conflict than large centralised systems.
In Europe the momentum behind renewables was strengthened on 7 September with the final adoption by the European Council of a definitive directive on the promotion of renewable energy sources in the electricity market. As well as environmental concerns the directive notes that the promotion of renewable sources of energy is a high priority “for reasons of security and diversification of energy supply.”
The new directive has the target, or what it calls “indicative objective”, of doubling the share of renewable energy in the member states as a whole from 6 per cent to 12 per cent of primary energy. In terms of share of electricity this translates to 22 per cent by 2010 (compared with about 14 per cent now). Rather confusingly these targets include large hydro, but the directive’s definition of renewables specifically excludes large hydro. According to the directive, the renewables are “wind, solar, geothermal, wave, tidal, hydroelectric installations with a capacity below 10 MW and biomass”, where biomass is defined as “products from agriculture and forestry, vegetable waste from agriculture, forestry and from the food production industry, untreated wood waste and cork waste.”
It has been suggested that large hydro is in fact a source of greenhouse gases due to the large quantities of methane-emitting rotting vegetation created by large scale damming. But including it in the targets will make them more achievable.
While each of the member states will have their own national “indicative targets”*, they will be essentially left pretty much to their own devices in terms of how they actually promote the renewables. This is the principle of “subsidiarity” in practice. And because the small-scale renewables tend to be more expensive ways of generating electricity than conventional technology, heavy promotion, including market incentives, will certainly be needed. In some cases the goals are going to be difficult to achieve. In the UK, for example, it turns out that recent electricity market reforms are undermining the renewables (see this month’s news). Urgent attention is needed if there is to be any hope of meeting the 2010 target, indicative or otherwise.
Right to choose? No thanks
California may have survived the summer without major power problems (mainly due to cooler than expected weather), but deep rooted disillusionment with deregulation remains. On 20 September the California Public Utilities Commission voted to immediately suspend the direct access of consumers to independent power retailers. This amounts to removing the essence of the much vaunted 1996 liberalisation legislation that was meant to lower electricity prices. According to commissioner Carl Wood, “Direct access is one half of a failed and collapsed deregulation project.”
In fact the CPUC move is designed to help the state extract revenue from power sales so that it can fund a bond issue planned later this year to enable it to repay the state’s Department of Water Resources for emergency power purchases early this year. This followed the escalation of wholesale prices and severe financial problems for PG&E and SCE.
However, it turned out that the idea of direct access, while fine in theory, never caught on in practice, with about 95 per cent of Californians choosing to stay with their local utilities.
Recent figures seem to suggest that it is not only Californians who are less willing to switch supplier than economic theory would have us believe. In Germany, similarly, the rate of switching is a paltry 2 per cent. This inertia is understandable by any retail customer who has gone through the bewildering process of trying to compare the offerings of competing electricity companies, particularly when other services are part of the package.
Name change in store
The Energy Storage Association recently changed its name to the Electricity Storage Association (ESA) and invited readers of its newsletter to inform against anyone claiming that it is not possible to store electricity. “If you spot a newspaper, magazine, article or whatever that is publishing…statements that you can’t store electricity, please let us know. If it is a website, perhaps you would email a link to info@electricitystorage.org as we may compile a ‘hall of shame’ as part of our efforts to change the public’s and the industry’s perception of our activities.” On this basis I am obliged to “shop” Walt Patterson, whose column in the August issue of Modern Power Systems contained the phrase: “…electricity, which cannot be stored.” However Walt has a point. Strictly speaking, it is usually chemical, mechanical, hydrostatic, etc, energy that is stored, not electricity, whatever the ESA might say.
Be that as it may, interest in energy storage systems continues to grow. TVA, which is already planning a Regenesys fuel cell based storage system, has recently placed a contract for a superconducting magnetic energy storage system with American superconductor, while in Norton, Ohio, there are plans afoot for a compressed air based scheme with a generating capacity of no less than 2700 MWe.