by jboullion | Nov 8, 2012 | Uncategorized
Immediate release
November 8, 20112
More information
Michael Vickerman
608.225.4044, ext. 2
mvickerman@renewwisconsin.org
The Real Meaning of Kewaunee’s Demise
November 6, 2012
A commentary by Michael Vickerman, Director, Policy and Programs:
Shock waves reverberated across the Upper Midwest when Dominion Resources announced in late October that it would permanently shut down its Kewaunee nuclear generating station in early 2013. Operational since 1974, the Kewaunee station, located along Lake Michigan 30 miles east of Green Bay, currently generates about 5% of the electricity that originates in Wisconsin.
Virginia-based Dominion, which bought the 560-megawatt Kewaunee plant in 2005 from two Wisconsin utilities, attributed its decision to its inability to secure long-term power purchase agreements to keep the plant going. Without securing purchasing commitments from utilities, Dominion would have to sell Kewaunee’s output into the regional wholesale market at prices well below the plant’s cost of production.
While the pricing environment for all bulk power generators is nothing short of brutal these days, Kewaunee carries the additional burden of being an independently owned power plant, since the entities most likely to buy electricity from that generator—utilities–have power plants of their own that compete for the same set of customers. And a growing number of these utility-owned generators burn natural gas, which is currently the least expensive generation source in most areas of the country.
Dominion’s decision comes down to simple economics. Wisconsin utilities believe that over the foreseeable future natural gas will remain cheap and supplies will remain abundant. That would explain their unwillingness to enter into long-term commitments with Dominion, even though Kewaunee recently acquired a 20-year extension to its operating license and does not need expansive retrofits to comply with environmental standards, unlike a host of utility-owned coal plants in Wisconsin.
But even if Dominion’s managers were convinced that natural gas prices have nowhere to go but up in 2013 and beyond, the company, lacking a retail customer base in the Midwest, could not risk producing power below cost while waiting for the turnaround.
Wisconsin utilities have placed heavy bets on natural gas in the expectation that it will remain the price-setting fuel for years to come. Over the last 12 months, they have bought several combined-cycle generators from independent power producers. Buying power plants enables them to pass through their acquisition and operating costs directly to their customers while generating returns to their shareholders. I suspect these utilities are anything but broken up over the impending demise of a nonutility competitor that could have supplied electricity to Wisconsin customers for 20 more years.
But there is another side to this story, which is that the low-price energy future Wisconsin utilities are embracing can only materialize if natural gas extraction companies continue to sell their output below production costs. This expectation is unrealistic, given the massive pain being inflicted on these companies in the form of operating losses, write-downs, and credit rating downgrades.
Don’t just take my word for it, ask Exxon Mobil CEO Rex Tillerson, whose company spent $41 billion during the shale gas boom to acquire XTO, a large gas producer that is now yielding more red ink than methane. As reported in a recent New York Times article, Tillerson minced no words in assessing the impact of its recent misadventures on the company’s bottom line. “We’re all losing our shirts today,” Tillerson said. “We’re making no money. It’s all in the red.”
Much of the industry’s woes are self-inflicted. The lease agreements that drillers eagerly signed during the height of the shale gas boom obligate them to extract the resource by a certain deadline, regardless of whether such activity is profitable. That these companies cannot disengage quickly from existing leases is greatly diminishing their appetite for exploring new natural gas prospects. Until a pricing turnaround occurs, they will refrain from spending money on exploring new resource provinces like Ohio and Michigan.
Sooner or later, this slowdown in exploration activity will tip the supply-demand equation in the opposite direction, resulting in lower-than-average gas storage volumes. Barring a repeat of last winter’s unusually mild weather, the crossover point should occur around January 1st. But with so many balance sheets in tatters from this highly unprofitable market environment, nothing short of a strong and sustained price increase will be required to persuade drillers to start taking risks again.
When this corrective price increase begins rippling through the electricity markets, it will be interesting to observe how the customers will respond. Right now Wisconsin utility managers are convinced that they are making the right call on natural gas. So completely have they swallowed the shale gas “game-changing” mystique that they were willing to let a 560 MW nuclear plant fall out of the supply picture for good. In this brave new world of theirs, gas is the new coal, and resource diversity is passé.
In the aftermath of Dominion’s announcement, a few commentators have defended the impending closure as a textbook example of how markets work. But this view ignores the delusional thinking that sent shale gas extraction into overdrive, causing prices to plunge below the cost of production. The real game-changer, as it turns out, here was not the emergence of “fracking” technology but the industry-generated public relations campaign that implanted the narrative of a nation awash in cheap natural gas into virtually every American cranium. But as we now see, this narrative has boomeranged on the natural gas industry, and they are paying for their current woes in ways that guarantee a pronounced pendulum swing in the direction of higher prices.
The question going forward is, will this narrative also boomerang on Wisconsin electricity users, especially after the last employee leaving Kewaunee turns out the lights?
END
Michael Vickerman is program and policy director of RENEW Wisconsin, a sustainable energy advocacy organization. For more information on the global and national petroleum and natural gas supply picture, visit “The End of Cheap Oil” section in RENEW Wisconsin’s web site: www.renewwisconsin.org. These commentaries also posted on RENEW’s blog: http://renewwisconsinblog.org and Madison Peak Oil Group’s blog: http://www.madisonpeakoil-blog.blogspot.com
by Ed Blume | Nov 7, 2012 | Uncategorized
A commentary by Michael Vickerman, Director, Policy and Programs at RENEW Wisconsin:
Shock waves reverberated across the Upper Midwest when Dominion
Resources announced in late October that it would permanently shut down its
Kewaunee nuclear generating station in early 2013.
Operational since 1974, the Kewaunee station, located along Lake Michigan 30 miles east of
Green Bay, currently
generates about 5% of the electricity that originates in Wisconsin.
Virginia-based Dominion, which bought the 560-megawatt Kewaunee plant
in 2005 from two Wisconsin utilities, attributed its
decision to its inability to secure long-term power purchase agreements to keep
the plant going. Without securing purchasing commitments from utilities,
Dominion would have to sell Kewaunee’s output into the regional wholesale
market at prices well below the plant’s cost of production.
While the pricing environment for all bulk power generators is nothing
short of brutal these days, Kewaunee carries the additional burden of being an
independently owned power plant, since the entities most likely to buy
electricity from that generator—utilities–have power plants of their own that
compete for the same set of customers. And a growing number of these
utility-owned generators burn natural gas, which is currently the least
expensive generation source in most areas of the country.
Dominion’s decision comes down to simple economics. Wisconsin utilities
believe that over the foreseeable future natural gas will remain cheap and
supplies will remain abundant. That would explain their unwillingness to enter
into long-term commitments with Dominion, even though Kewaunee recently
acquired a 20-year extension to its operating license and does not need
expansive retrofits to comply with environmental standards, unlike a host of
utility-owned coal plants in Wisconsin.
But even if Dominion’s managers were convinced that natural gas prices
have nowhere to go but up in 2013 and beyond, the company, lacking a retail
customer base in the Midwest, could not risk
producing power below cost while waiting for the turnaround.
Wisconsin utilities have placed heavy bets on
natural gas in the expectation that it will remain the price-setting fuel for
years to come. Over the last 12 months, they have bought several combined-cycle
generators from independent power producers. Buying power plants enables them
to pass through their acquisition and operating costs directly to their
customers while generating returns to their shareholders. I suspect these
utilities are anything but broken up over the impending demise of a nonutility
competitor that could have supplied electricity to Wisconsin customers for 20
more years.
But there is another side to this story; the low-price energy future that
Wisconsin utilities are embracing can only materialize if
natural gas extraction companies continue to sell their output below production
costs. This expectation is unrealistic, given the massive pain being inflicted
on these companies in the form of operating losses, write-downs, and credit
rating downgrades.
Don’t just take my word for it, ask
Exxon Mobil ceo Rex Tillerson, whose company spent $41 billion during
the shale gas boom to acquire XTO, a large gas producer that is now yielding
more red ink than methane. As reported in a recent New York Times article,
Tillerson minced no words in assessing the impact of its recent misadventures
on the company’s bottom line. “We’re all losing our shirts today,” Tillerson
said. “We’re making no money. It’s all in the red.”
Much of the industry’s woes are self-inflicted. The lease agreements
that drillers eagerly signed during the height of the shale gas boom obligate
them to extract the resource by a certain deadline, regardless of whether such
activity is profitable. That these companies cannot disengage quickly from
existing leases is greatly diminishing their appetite for exploring new natural
gas prospects. Until a pricing turnaround occurs, they will refrain from
spending money on exploring new resource provinces like Ohio and Michigan.
Sooner or later, this slowdown in exploration activity will tip the
supply-demand equation in the opposite direction, resulting in
lower-than-average gas storage volumes. Barring a repeat of last winter’s
unusually mild weather, the crossover point should occur around January 1st
. But with so many balance sheets in tatters from this highly unprofitable
market environment, nothing short of a strong and sustained price increase will
be required to persuade drillers to start taking risks again.
When this corrective price increase begins rippling through the
electricity markets, it will be interesting to observe how the customers will
respond. Right now Wisconsin utility managers are convinced that they are
making the right call on natural gas. So completely have they swallowed the
shale gas “game-changing” mystique that they were willing to let a 560 MW
nuclear plant fall out of the supply picture for good. In this brave new world
of theirs, gas is the new coal, and resource diversity is passé.
In the aftermath of Dominion’s announcement, a few commentators have
defended the impending closure as a textbook example of how markets work. But
this view ignores the delusional thinking that sent shale gas extraction into
overdrive, causing prices to plunge below the cost of production. The real
game-changer, as it turns out, here was not the emergence of “fracking”
technology but the industry-generated public relations campaign that implanted
the narrative of a nation awash in cheap natural gas into virtually every
American cranium. But as we now see, this narrative has boomeranged on the
natural gas industry, and they are paying for their current woes in ways that
guarantee a pronounced pendulum swing in the direction of higher prices.
The question going forward is: will this narrative also boomerang on Wisconsin electricity
users, after the last employee leaving Kewaunee turns out the lights?
by Ed Blume | Oct 17, 2012 | Uncategorized
From an article in the Charlotte Observer by Sammy Fretwell. The situation for solar in South Carolina is much the same as it is in Wisconsin. Here, we have an example of a citizen fighting back for the right to clean energy:
COLUMBIA, S.C. Wiley Cooper says he was frustrated when an electric utility prevented his church from acquiring a money-saving solar power system last year.
Now, he’s leading a crusade to make sure that doesn’t happen again.
The retired Methodist minister recently launched a petition drive that he hopes will make installing solar panels cheaper and easier for South Carolina churches, homeowners and others. He intends to seek a change in state law when the Legislature returns in January.
“Powerful utilities want you to buy their electricity, not create your own,” Cooper’s petition says. “Let’s change that.”
Cooper already has picked up support. One Columbia legislator said the law needs changing and a fellow minister said it’s “immoral’’ to keep churches and charities from using solar power. Dozens of people have signed the petition since it started several weeks ago.
At issue is a state law that grants power companies exclusive rights to sell energy in their territories. Power companies say any firm wanting to sell solar energy, no matter how small, must be licensed as a utility – an expensive and involved process.
And that’s one reason solar companies that provide free or low-cost solar panels stay clear of South Carolina. These businesses often are paid back by selling power from the panels to the homeowners at a rate they can better afford.
Critics say South Carolina law is a significant barrier to those who want solar energy but can’t afford the upfront expense of buying panels. It can easily cost more than $20,000 to buy solar panels for a private home – more for churches and large buildings. These concerns are among broader questions about the state’s lack of commitment to solar power.
Without high up-front costs, solar panels can save people money on their monthly power bills by reducing the amount of energy needed from the electric company. Typically, folks who use solar panels also receive energy from power companies at night or during rainy periods.
The 69-year-old Cooper, a former S.C. United Way director, said it’s hard to understand why churches in other states can benefit from low-cost solar but the law restricts the practice in South Carolina.
“We need to remove as many barriers as we can,” Cooper said. “You can’t do in South Carolina what is now being done with solar energy in other states.” At least 22 states, mostly in the West and Northeast, allow solar companies to provide free solar panels to homeowners and sell the power directly to them, according to a federally supported database of renewable energy policies. Typically, the monthly amount paid to a solar company for the energy is enough for a property owner to reduce the overall power bill.
None of those states is in the South, where regulation often limits their entry. But some Western states, including Arizona, specifically exempt charities, schools and churches from restrictions that would prevent them from getting free solar panels.
Bruce Wood, chairman of the S.C. Solar Council, said exempting charities and churches might be the most realistic way to resolve the issue in South Carolina.
Joshua Pearce, an energy researcher from Queens University in Canada, said allowing solar companies into states can be critical to the expansion of sun power.
Pearce has analyzed the economics of solar and nuclear policies in North America.
“This is very important,” he said. “The typical homeowner doesn’t have the capital in his bank account to put in a photovoltaic (solar panel) system.”
Cooper’s crusade began a few weeks ago in response to a dispute that erupted last year between SCE&G and a small New England solar company.
DCS Energy Inc. had planned to provide S.C. churches and nonprofits with free solar panels. In return for not charging monthly energy payments, DCS would keep tax incentives and renewable energy credits typically provided to the owners of solar panels. It also would receive federal stimulus money.
But in September 2011, SCE&G filed a complaint with the state Public Service Commission, citing state law and contending that DCS Energy should be regulated as a utility.
The solar company then voided about 80 contracts it had in South Carolina and left the state, saying that it didn’t have the resources to fight SCE&G, The State newspaper reported in March. Among those counting on the free panels was Washington Street United Methodist Church, where Cooper worships Sunday mornings.
Cooper said solar power could have helped his church and others cut their power bills, but he also said it would have been better for the environment. Coal plants release mercury, arsenic and carbon dioxide, while nuclear plants produce piles of deadly atomic waste.
Whether Cooper’s petition drive will make a difference may depend on cooperation from the state’s utilities. South Carolina’s power companies and electric cooperatives have a strong team of lobbyists at the State House, and they often are effective at getting their way.
So far, they haven’t expressed much interest in Cooper’s effort.
Utilities complained last year about a solar tax credits bill that they feared would open the door for “third-party sales” of electricity by owner/operators of solar installations, state records show.
SCE&G, which serves the Midlands, declined to discuss possible legislation that would allow third-party sales by solar companies in its territory. But SCE&G did say state law requires any business wanting to sell power in South Carolina to become licensed as a utility, just like power companies.
The company also hinted that allowing solar companies into the state could create confusion among utilities. It would be up to the S.C. Public Service Commission to decide how a solar company operates in the state, SCE&G said. The PSC has never issued a ruling on whether solar power companies are legal in South Carolina.
“Only registered utilities are allowed to sell electricity to retail customers in South Carolina,” the company said in an email to The State. “If multiple utilities were to serve one retail customer, a determination will be needed on which utility, if any, is obligated to provide the reliable (backup) service when the renewable generator under-performs.”
Santee Cooper, which has drawn criticism over plans to raise power bills for some churches, declined comment. The state-owned utility serves eastern South Carolina.
Duke Energy Inc., a multi-state company with territory in northern and western South Carolina, said solar companies that sell power to customers should be treated the same as the big power companies. Duke said solar energy provides power to the company’s electrical grid from multiple sources.
Today, the company is used to getting much of its power from a centralized generation plant, much as utilities have for decades.
“Solar energy challenges this business model,” Duke said in an email.
Despite hesitation from power companies, the Rev. Cooper has support from the S.C. Coastal Conservation League and other environmental groups, which say the state should do more to embrace nonpolluting solar energy.
The Conservation Voters of South Carolina, which represents environmental groups at the State House, agreed earlier this month to make solar-friendly legislation a priority in 2013.
Rep. Joe Neal, D-Richland, said he hopes something changes.
Existing state law “has made it very difficult for solar companies to introduce this technology to the grass roots,” Neal said. “As this is happening all over the country, it is not happening in South Carolina.”
Pastor Jimmy Jones, director of Christ Central Ministries in Columbia, said changes in state law would help his charity. Like Cooper’s Washington Street United Methodist, Christ Central lost out on solar panels after the DCS-SCE&G dispute. The ministry continues to pay high power bills, which keeps it from spending that money on the poor, said Jones who blames SCE&G.
“SCE&G said, ‘We want the money,’” Jones said. “It is immoral – immoral to try to stop people from helping themselves.”
If you care about this issue in Wisconsin, please consider signing on to the Clean Energy Choice initiative here.
by Ed Blume | Oct 8, 2012 | Uncategorized
An article from Wisconsin Ag Connection:
An annual review of Wisconsin utilities showed that the La Crosse-based Dairyland Power Cooperative had a substantial increase in its renewable energy generation and purchases. The company says about 12 percent of its electricity sales now comes from renewable sources of energy.
According to the Wisconsin Utility Regulation Report, the Public Service Commission noted that in 2011, the renewable energy provided by Dairyland to its Wisconsin member cooperatives now achieved a level that exceeds its 2015 requirements. The state’s Renewable Portfolio Standard mandates that all Wisconsin utilities reach the target of 10 percent renewable generation or investment by year 2015.
“As a cooperative utility, we will continue to make prudent investments in renewable energy,” said Brian Rude, Dairyland’s vice president of external and member relations. “Diversifying our generation mix with a variety of renewable options, such as wind, hydro, animal waste-toenergy, biomass and solar, has been and will continue to be a key part of our power supply plans.”
Dairyland recently announced it is purchasing the excess energy output from a new solar photovoltaic installation at the City of Galena, Illinois, wastewater treatment plant. The facility is interconnected with Jo-Carroll Energy, a Dairyland member cooperative.
Dairyland Power provides wholesale electricity to 25 member distribution cooperatives and 15 municipal utilities in four states.
by Ed Blume | Sep 27, 2012 | Uncategorized
(Madison) – In testimony submitted to the Public Service
Commission of Wisconsin (PSCW) on Wednesday, RENEW Wisconsin objected to We
Energies’ proposal to weaken its net-metering service to new customers seeking
to generate electricity on-site using solar panels and other renewable energy
systems.
In its current rate proceeding, We Energies proposes not
to pay a new customer-generator for any electricity produced in excess of the
amount consumed on site.
“We Energies’ proposal is a radical
departure from its current practice paying the full retail rate for energy
that’s fed back to the utility’s system,” said Michael Vickerman, director of
programs and policy for RENEW Wisconsin, a statewide renewable energy advocacy
organization.
“This proposal is the most
extreme example yet of We Energies’ ongoing retreat from customer-sited
renewables, and we urge the PSCW to reject it.
Net metering allows customers to sell
the unused output from their solar electric or other renewable energy systems
back to the utility at the full retail rate each month, so long as the total
amount of electricity produced is less than or equal to the customers’
usage.
“Utilities routinely pay for all the energy supplied by non-utility generators to its
system.
“By refusing to purchase the
small amounts of electricity they may export to the utility, We Energies is abusing
its monopoly power in a way that discriminates against its own customers.”
Vickerman said.
In
its proposal, We Energies would limit its net metering service to systems no
larger than 20 kilowatts. In contrast, Madison Gas & Electric, Xcel Energy,
and Wisconsin Public Service provide net metering to systems as large as 100
kilowatts.
“When you take into account what other in-state
utilities are offering, it seems obvious that We Energies is asking for special
treatment from the PSC.
Yet, it has
provided nothing in its rate case to demonstrate that a higher net metering ceiling
would cause it any more harm than to the other utilities,” said Vickerman.
Vickerman
pointed to Michigan as a better model for setting net-metering service
standards.
“Thanks
to legislation passed in 2008, We Energies’ Michigan customers enjoy a much
higher standard of service than what the utility proposes for its Wisconsin
customers,” Vickerman said.
“Along with
all other investor-owned utilities in Michigan, We Energies must provide full
retail credit for all electricity produced by renewable energy systems up to 20
kW and must provide a reasonable net metering rate for systems up to 150 kW.”
In
the most recent Freeing the Grid: Best Practices in State Metering Policies report
prepared for the National Renewable Energy Laboratory, Michigan rated an “A”
for its net-metering policies. By comparison, Wisconsin earned a “C.” The report can be viewed here.
Earlier this month, RENEW issued
a report card grading individual utility performance
on renewable energy, in which We Energies received a “C” for its 2011 performance.
-END-
RENEW Wisconsin is an independent, nonprofit
501(c)(3) organization that leads and represents businesses, organizations, and
individuals who seek more clean renewable energy in Wisconsin.More information on RENEW’s Web site at
www.renewwisconsin.org.
