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Chinese Coal Plants Face Bankruptcy – Woes of the Regulated Utility

According to a recent article by Industrial Fuels and Power, 87of China’s coal-fired power plants could face bankruptcy as a result of disagreements between state-owned utilities and government economic planners. These plants, which represent 20% of China’s coal fleet, are struggling to survive as high demand (and resulting high coal prices) collides with government mandated electricity prices aimed to keep economic development on a positive trajectory through cheap electricity.

In regulated electricity markets, the price of electricity is set by government entities instead of the utilities themselves. These prices are established by a combination of factors including predictions on fuel prices and any capital investments made for power plant infrastructure. To request an increase in the price of electricity, utilities make a rate case – an argument for charging a certain amount of money for power – that outlines their expenses (and predicted increase in costs). Governing authorities then approve a price for electricity, which the consumer pays.

This regulated structure has pros and cons. It benefits utilities by providing an effective guaranteed rate fo return on their investments while eliminating price gouging for areas with few electricity providers. But, at the same time this structure can lead to problems when government priorities – such as keeping prices low without subsidies – conflict with market realities such as fuel price spikes and necessary plant maintenance and upgrades. This is the problem facing Chinese coal plants.

The Chinese government wants to keep electricity costs low as a party of the country’s economic development strategy. Cheap energy means cheap goods – a backbone of China’s success in exporting goods through the world’s markets.

So, what can be done when the government wishes to keep electricity prices low in the face of rising costs for producing that electricity?

In the short-term – subsidies can be made, robbing Peter to pay Paul. Funds can be shifted from other sources (for examples through taxes on consumer goods) to keep power plants in the black, while maintaining low utility bills for China’s residents. But, in the long-term, this could quickly prove to be an unsustainable strategy if power plant expenses continue to rise.

For now – China’s coal fleet is curtailing electricity generation in order to reduce the amount of coal that they burn, hoping that fuel prices will drop. This stop-gap measure will (hopefully) keep the doors open and the generators running until a compromise can be struck between utilities and the government’s economic planners.

[HT to Chad Blevins for sending me the article that inspired this post]

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The Winds of Change are Blowing in West Texas

This video was released in 2007 on CBS Sunday Morning News, but it still speaks today – when more than 10,000 MW of wind power has been installed in Texas. A wind boom that doesn’t seem to be slowing down.

A transcript from this video can be found here.

100 Turbines in 100 Days – 300 MW of installed offshore wind

Wind power is generally discussed in two main applications – onshore or offshore. In Texas, we have worked to expand our onshore capacity, installing turbines (with a capacity on the order of 2 Megawatts) on land in west Texas and the Texas Panhandle. But, we have largely ignored offshore capabilities, where turbines would be installed on platforms in the Gulf of Mexico. There are many advantages to offshore wind power including the wind’s profile (think of those sea breezes that you enjoy in the summer). The power in this offshore wind could provide a more consistent flow of power for use onshore.

Vestas wind power has been installing offshore wind turbines since 1990 and is a leader in the wind power industry. In April, they released a video discussing their new 7 MW wind turbine (the V164) and its offshore applications. This video discusses how Vestas installed 100 turbines in 100 days, for a total of 300 MW installed in offshore wind – an average of 3 MW per turbine. With their new 7 MW turbines, they can more than double the capacity of the same sized wind farm, potentially leading to more economical wind power for the communities living onshore.

Check out this video on Vestas’s new 7 MW wind turbine – and its application in offshore applications. They’re huge – and pretty cool.

http://c.brightcove.com/services/viewer/federated_f9?isVid=1

Energy At the Movies at SXSW

April 29, 2011 1 comment

During this year’s South By Southwest (SXSW) interactive music and film festival in Austin, TX, an event was held to discuss Energy at the Movies. Hosted by Dr. Michael E. Webber of The University of Texas at Austin, this event focused on energy as it is portrayed in and influenced by the silver screen. After giving a lecture on this topic, Dr. Webber hosted a panel discussion with research scientist and author Sheril Kirshenbaum, film historian and UT film Professor Dr. Charles Ramirez-Berg, screenwriter and director Matthew Chapman, and producer Turk Pipkin. Yesterday, UT’s Cockrell School of Engineering released video of this discussion. If you’d like to check out the lecture that inspired this discussion, you can access the youtube video here.

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ARPA-E: Leaping Ahead in Energy Storage Innovation

April 16, 2011 Leave a comment

The Advanced Research Projects Agency – Energy (ARPA-E) works at the heart of high-risk energy innovations. Modeled after the Defense Advanced Research Projects Agency (DARPA), ARPA-E was established in 2007 to promote and fund energy technology research and development. With an annual budget in the neighborhood of $400 million, this agency supports the development of technologies that result in reductions in imported fuels and energy-related greenhouse-gas emissions, while improving energy efficiency across all sectors.

On Thursday, the agency’s director Arun Majumdar announced that a new technology will be tested on the nation’s electric grid. It is believed that the first company to be tested in this grid environment will be an advanced compressed air energy storage (CAES) technology. This technology could efficiently store energy in the form of compressed air, which can be stored and later released – creating a type of air battery that can be used on the gigawatt (power plant) scale.

Texas Solar Advocates Hope for Legislative Boost

Advocates of solar power are urging passage of a bill that would add a dollar per month to homeowners’ electric bills to fund solar projects.

The House State Affairs Committee heard testimony on the bill late last night. Its sponsor, state Rep. Drew Darby, R-San Angelo, told the committee that solar was a good complement for Texas’ existing energy resources, and that its costs had dropped dramatically in recent years.

“Texas should be a leader in building the domestic solar industry,” he said. Solar installations could make use of the new transmission lines being built to aid wind power, he said.

Texas, although the national leader in wind power, lags far behind many states, and especially California, in solar.

Opponents of the bill warned of the still-high cost of solar. Ryan Brannan, a policy analyst with the conservative Texas Public Policy Foundation, said that the bill could end up costing the state’s taxpayers about $240 million — not including administrative fees.

“If California is leading the way in this, we’ll let them have it and we’ll keep taking their citizens and their business,” he said.

The Texas Association of Manufacturers also opposes the bill due to costs.

The bill would add a $1 per month charge to home electric bills. It would also add $5 per month to the bill for a company meter, and $50 a month for each industrial meter (some manufacturers will have multiple meters, so the bill establishes a limit of $250 a month for a “single industrial account”). This was not even a “rounding error” for manufacturers, Darby said. Individuals and small companies will be able to opt out of the fee.

An array of solar companies showed up to praise the bill, which is seen as the greatest hope of the solar industry, which came close to getting an incentive bill passed last session but ultimately fell short.

Not all lawmakers were present, given the late hour. The committee chairman, Byron Cook, R-Corsicana, expressed some concerns on the costs of the bill. “I don’t really want to explain to my mother why she’s got another dollar on her bill,” he said. Some of the solar companies reiterated that costs have dropped significantly.

State Rep. Dan Huberty, R-Houston — whose background is in natural gas — challenged the Texas Public Policy Foundation, saying, “Don’t we create jobs by doing this too?” The bill, he said, could help Texas to “become an energy independent state.”

Representatives of Wal-Mart and the Texas Association of Builders expressed support for the bill.

The program would last five years, after which time, its backers say, solar costs could well reach grid parity.

In the Senate, solar bills under consideration include one by State Sen. Troy Fraser, R-Horseshoe Bay, which would create a solar rebate program.

This article originally appeared in The Texas Tribune at http://trib.it/hEVRjT.

kgalbraith@texastribune.org

Obama’s plan to reduce oil imports

March 30, 2011 3 comments

Today, President Obama discussed his strategy to reduce US oil imports, with the goal of a 1/3 reduction in the next 10 years. This announcement complimented his State of the Union commitment to the goal of producing 80% of the country’s electricity from clean energy sources by 2035 by focusing on the oil and gas section of the US energy pie.  According to a senior White House official, the President’s strategy will focus on increasing domestic energy production while reducing consumption and can be broken down into the following 4 parts:

Part 1 – Increase domestic oil production.

According to the US Department of the Interior, more than 2/3 of offshore oil leases in the Gulf of Mexico and more than 1/2 of onshore leases on federal land are neither actively producing oil or exploring potential development opportunities. This represents a large untapped domestic energy resource that the President will propose we focus on developing. Today, the President discussed the “massive supplies of energy waiting to be tapped” and how we can ensure that these leases do not remain idle.

In response, the oil industry has already made statements regarding the lengthiness of the mapping, testing and infrastructure development process that must occur before oil or gas can be produced. According to the Western Energy Alliance, “…obtaining a lease is just the first step in a lengthy process filled with bureaucratic hurdles…If this Administration was serious about domestic energy production from federal lands, it would ease some of the redundant red tape that is preventing companies from developing leases they currently hold.”

Part 2 – Implement New Natural Gas Industry Incentives

The most unclear part of Obama’s plan focuses on developing domestic natural gas resources by increasing industry incentives for developing resources in a safe and responsible manner.

According to senior White House Official, “we know that in the U.S. we have tremendous reserves of natural gas but we need to develop those resources responsibly in a manner that is not going to impact our groundwater supply.”

Part 3 – Develop biofuel resources

The third part of the President’s 4-part plan focuses on the potential role for biofuels in reducing US oil imports. In his speech today, the President set specific goals for building four new advanced biofuel facilities in the US in the next 2 years.

Part 4 – Reduce energy consumption with efficiency

The final part of the President’s plan focuses on reducing energy consumption through energy efficiency. The President proposed several energy efficiency targets, including vehicle efficiency standards and smart grid standards and goals. This part of the President’s plan will be built upon the research and development dollars that he proposed in his 2012 budget.