Below are a few letters received at EnergyBiz Insider on topics that appeared in the past few weeks. They capture the essence of how many readers say they feel.
____________________________________

Consumer Choice and Coal - July 16, 2010

I always enjoy your articles. It would not surprise me if electric utilities would increasingly switch from coal to natural gas to generate electricity in the future around 2020, depending on the level of carbon tax and costs. A possibility is that the 10 percent decrease in generation from coal could come from increased combined-cycle generation and renewables, approaching the year 2020.

Unfortunately, the increased demand for natural gas may drive the price of fuels up, including gasoline. I am starting to notice that utilities may add coal gasification facilities to some existing coal plants and carbon capture and sequestration as a solution to comply with carbon reductions after 2020, if cost effective.

Ed Arguello, P.E.

The coal industry has a trump card . . . coal is a raw material for synthetic liquid fuel. When world oil prices exceeded $100 per barrel a few short years ago, Sasolburg in South Africa was producing synthetic oil from coal for some $25 per barrel.

Harry Valentine

This article is incorrect about the effect of sulfur on global warming.

"It is also low in sulfur, a toxic compound considered by many scientists as contributing to the earth's warming and one of those emissions that regulators are trying to cut."

While sulfur (SO2) is generally considered poor for public health and a major contributor to acid rain it does not contribute to global warming (climate change). In fact the opposite is true; sulfur aerosols in the atmosphere increase solar energy reflected back to space, contributing to a global cooling effect.

On the other hand, I thought it was interesting that coal usage will increase over the next 25 years due to the growth in electricity demand even if its percentage contribution to the overall electricity generated drops. Good point!

Ryan Zupon, P.E.

Lending Coal a Hand - July 21, 2010

Who does the United States think it is? The politicians have been talking about a comprehensive energy policy since the gasoline shortages in the 1970's. They have been talking about CO2 for years. The utility industry is at a standstill; because, of the uncertainty concerning future regulations. Every power engineer knows that we should use oil for transportation and coal and nuclear for power generation. The role of gas is to supplement the base fuels, depending on its true reserves.

It's well overdue for true science, instead of politics, to establish a comprehensive energy policy.

James G. Gatz
Mechanical Engineering Consultant
Sargent & Lundy LLC

Not sure that your reasoning is accurate.

Were you to look at the potential power resource to be found in African geothermal from the Africa rift, extending from Zanzibar to the Red Sea, and to Saudi Arabia, you would find enough power to supply all of Africa's needs for a couple of hundred years, along with that of Europe. The cost to produce that power would come in for less than what South African coal-fired plant producers are pushing for their coal-fired plants in South Africa. The obstacle is not technical, nor financial, it is the power of the coal lobby in South Africa whose song you now seem to be chirping.

Kim A. Barkan
TransGas Energy GP., LLC
International Trade Development Corporation

I just wanted to compliment you on a great piece about coal. Very well reasoned and written.

Having just returned from South Africa last month (World Cup) I can say that cost-competitive, reliable energy is extremely important to the future of that economy. I hope we can find cleaner ways to use coal in our energy portfolio.

Tom Wolf
Executive Director
Energy Council
Illinois Chamber of Commerce

The Power of Competition - July 23, 2010

"We continue to urge states that restructured to appreciate that re-regulation is unwise, especially in a rising cost environment for anybody building new power plants," says John Shelk, chief executive of the Electric Power Supply Association, in a speech. "It makes more sense to stick with competitive suppliers who have every incentive to control costs and operate plants more efficiently."

I'm sorry, but I must take exception to the assertion by Mr. Shelk that, "It makes more sense to stick with competitive suppliers who have every incentive to control costs and operate plants more efficiently." Apparently, Mr. Shelk doesn't fully understand the principles of free market competition. What these unregulated companies have "every incentive" to do -- first and foremost -- is make the most profit possible for their shareholders. It's naive at best to think that there is anything that even comes close to that objective in priority, because its absence will eventually lead to the demise of the company, whatever the other priorities may be. (Unlike a regulated monopoly, unregulated entities do not enjoy guaranteed liquidity.)

Moreover, consumer behavior both here and abroad has shown that a large percentage of consumers presented with a "choice" will switch providers for no other reason than that they can. While this may give the appearance of acceptance or success, what it really does is create a high (and exceedingly expensive to administer) churn rate that is tantamount to a constant shuffle -- not a real trend or change. That is, this is not a mandate for deregulation; it's merely a demonstration of human behavior -- a factor that to date, has been routinely and repeatedly overlooked in virtually every aspect of utility market reconfiguration, ranging from ratepayer incentives for TOU metering/rates to so called standard market design, to the (mostly failed) deregulation process itself.

And finally, a lot of people still don't seem to understand that there is no implicit guarantee of lower prices as a result of competition! The reality is that while competition may lower prices in some areas (frequently at the expense of service quality, reliability, etc.), it can -- and often does -- increase prices for others. This result is arguably a leveled playing field, but certainly not a guarantee of lowered prices for all. For example, full deregulation of electricity might lower kWh costs for people living in the Northeast where aging, expensive fossil plants are the norm, but what do you suppose will happen to the low rates people living in the Pacific Northwest enjoy as a result of a predominance of hydroelectric generation? That's the real face of competition, folks. It's not a panacea by any means, and keep in mind that we're not talking about a discretionary commodity here; we're talking about electricity, without which life as we know it comes to a scree! ching halt.

Mike Marullo

A couple of observations about retail and wholesale restructuring, and the arguments on both sides:

First, even a time horizon of 15 years is not adequate to measure progress. Restructuring attempted to change a regulated industry that had become risk-averse and lost its innovative edge over the nearly 100 years of its existence. We need to be a little more patient. We also need to remember that both regulation and competition have their strengths and weaknesses. We're very familiar with the strengths and weaknesses of the regulated model in power and in many states, traditional cost-of-service regulation has been found wanting. Competition is far from perfect, but over the long run it is likely to be an improvement over cost-of-service regulation. Moreover, it is essential to the success of what I refer to as the consumer-facing elements of the Smart Grid concept.

Second, although based largely on anecdotal evidence, there is little doubt in my mind that wholesale competition has pushed the incumbents to embrace more efficient operating and maintenance practices and to switch to new technologies sooner than they otherwise might. Independent generators drove adoption of gas-fired combined cycle plants, which utilities were only beginning to examine, and then very cautiously, in the mid-1980s. Utilities shortened maintenance turnarounds dramatically once independents paved the way. Independents are willing to operate outside the envelope that prolongs asset life if the price is right. Incumbents focus on how to maximize asset life, even if it means building more assets at higher cost to do the same job. I'm not suggesting the incumbents were sloths, but a significant attitude adjustment takes place when profitability depends on operating like any other competitive business rather than relying on the regulatory compact.

At the retail level, competitive suppliers are willing and able to cut deals that meet the needs of customers without lengthy regulatory proceedings. Although it's not labeled as such, many large commercial and industrial customers served by competitive suppliers are already taking service under dynamic pricing plans, with no fuss and no objections from consumer advocates. Under retail competition, customers are freed from the bear hug of their local utility, which allows them much more flexibility to choose from a variety of cost-effective alternatives to grid power.

Competition certainly is not a panacea, but neither was regulation.

Jack Ellis
Resero Consulting

The Natural Gas Bridge - July 26, 2010

You are making a couple of assumptions that are tenuous;

1) The U.S. will buy into this cap and tax proposal because they will believe that climate change is manmade.

2) Renewables will become cost effective.

Look up the amount of energy deposited on the face of the earth per square meter. Now assume 100 percent efficiency and how much space you need to equal the requirements of a moderate home (assume 10KW).

After you factor in things like cloudy days, night, angles of impact, do you still think solar will be effective? Now turn to wind. How effective is it currently? How do people like living near the wind mills?

Do you still think I am wrong, or do my arguments have merit?

Please do the math. I did and never could achieve payback for a fully solar house in South Carolina.

Thom Peschke

Yes, natural gas is this fantastic fuel of the future, which finds favor amongst even the furor of global warming alarmists. Until, of course, the do-gooders discover that it has to be drilled for.

Mike Watkins
Heat Exchanger Engineer
LMS100 Intercooler
GE Energy

Getting Permission to Drill - July 30, 2010

Your article lays out some of the controversies relates to restarting deepwater drilling in the Gulf following the worst environmental disaster in North American history. If we try to assess the situation while leaving behind the near-term emotions, it is clear that neither the industry nor the government have any idea what went wrong to cause the disaster. Transocean blames BP, Halliburton says they did nothing wrong, the blowout preventer company (Cameron) stays silent, and BP blames the government. Meanwhile the rest of the industry backs away from BP and (after the fact) says that they would never operate the way BP did.

Until the industry understands the faulty practices extending from boardroom to drilling-deck that led to the disaster, the government is correct to stop issuance of further deepwater drilling permits. The nuclear industry did not promote continued non-stop expansion before understanding all causes following the Three Mile Island accident in order to save some construction jobs. We don't keep flying the space shuttle following each accident without understanding and correcting the root causes, in order to save a few contractor jobs.

The administration is correct to insist on root cause understanding and corrective actions before we recklessly risk another Macondo blowout. The Democrats also need to insist on lifting of the $75 million damages liability cap. Lifting the cap will not stop deepwater drilling, but will require drillers to obtain billions in insurance in order to drill. There is no more certain way to avoid another Macondo than to make drilling companies directly responsible for their actions. The argument that "small companies will not be able to drill" can be fixed through insurance. In voting to keep the $75 million damages liability cap, politicians are once again setting up U.S. taxpayers for a multi-billion dollar bailout if the oil company does not have the balance sheet to pay for the damage they cause.

One more example of our "cheap oil at any price" national strategy.

Thomas Conroy

Rather than "throw the baby out with the bathwater" i.e. ban deep oil well drilling, please consider the following:

A Minerals Management Service (MMS) June 2010 rule now establishes new casing and cementing design requirements in the design and construction for all offshore wells. It requires that lessees and operators must have all well casing designs and cementing programs and procedures certified by a Professional Engineer (P.E.), verifying the casing design is appropriate for the purpose for which it is intended under expected wellbore conditions for any new surface or undersea well using a blowout preventer (BOP) stack. Professional engineers only have been required under existing rules to oversee the design and construction of mechanical and electrical systems on oil-production facilities.

U.S. regulations are more lax than other countries when it comes to relief wells. In Canada, for example, energy companies must have plans and permits for relief wells before drilling is approved. These plans must describe exactly how engineers would drill a relief well if required to do so -- down to identifying the drilling vessel and spelling out how long it would take.

The U.S. government's proposed ban reflects a political environmental "over-kill" agenda rather than a technically based determination of how to avoid this accident from reoccurring.

Dr. Richard W. Goodwin, P.E.
Environmental Engineering
Consultant

 

Respond to the editor.