The POWER Podcast

Power Company Business Models Are Evolving The power industry is changing and power companies must evolve to stay competitive. Many businesses are transitioning from vertically integrated, centralized utility structures to more-distributed models. JEA offers a good case in point. JEA is a not-for-profit, community-owned utility located in Jacksonville, Florida. It serves an estimated 466,000 electric, 348,000 water, 271,000 sewer, and 11,000 reclaimed water customers. Aaron Zahn, managing director and CEO with JEA, was a recent guest on The POWER Podcast. He explained some of the challenges not only facing his company, but also investor-owned utilities (IOUs) and other power providers across the country. “Whether you’re municipally owned or an IOU, ultimately, you’re in competition to make sure you’re providing the best service to the customer, because now there are disruptive providers of solar, and battery, and microturbines, and others, that don’t even fall into either of those two classes,” Zahn said. “For the last 100 to 125 years, those were the only two predominant providers, and that’s just no longer the case.” As a public utility, JEA found it hard to gauge value. It didn’t have a stock price to measure the company’s performance against, so it needed specific metrics that it could use in decision-making processes. To gain some perspective, JEA established its CCEF benchmark, which identified four basic measures of value. The acronym stands for customer, community, environmental, and financial values. “We now tie metrics to each one of them and cascade them throughout the organization and throughout the community to let people know what direction—where we are today—and actually what direction we’re headed and where we expect to be in the future. And I think that’s enabled us to have very deliberate and methodical conversations about our strategies and tactics on how to move forward,” said Zahn. JEA’s power mix has evolved over the years too. In the early 1970s, its power was predominantly produced from oil-fired generation. It shifted more toward solid fuels as the price of oil escalated. It has since added more natural gas-fired generation, and in 2008, it signed an agreement with Municipal Electric Authority of Georgia (MEAG) to purchase nuclear power from the Plant Vogtle expansion. There is pending litigation on the validity of that contract, however; JEA is seeking to void the agreement. One of the underlying reasons is that solar energy is seen as a more-cost-effective solution for its customers. “Today, we’ve executed 250 MW of power purchase agreements for solar at a price almost 20-plus-percent cheaper than our current cost of dispatch of our fleet. And that will be a long-term hedge for us for about 20, 25 years, and completely emission-free,” Zahn said. Zahn talked about several other changes taking place at JEA and touched on some of the company’s recent accomplishments, including a 2019 Best Practices Award in Outage Communications. The company was recognized by Chartwell Inc. for its multi-channel Restoration 1-2-3 process, which goes into effect during major storm events. Restoration 1-2-3 focuses on actions during each phase of storm restoration and acknowledges the key role customers play in efforts to restore power safely and quickly when massive outages occur.

When it comes to gas turbines, size matters. Although the market for large, heavy-duty gas turbines has been challenging in recent years, demand for industrial gas turbines—generally units with output ranging from about 5 MW to 100 MW—has been growing, according to Reed Lengel, product line manager for SCC-800 solutions with Siemens Energy. “When you really dig into it,” Lengel said, speaking as a guest on The POWER Podcast, “there’s actually been pretty significant improvements—or growth in this power band within the portfolio. Where there’s been really a decline over the last four years in the total gas turbine sales—that’s just globally, looking at all gas turbine sales—in that same timeframe, the market share of this 40 to 90 MW power band gas turbine has actually doubled.” For Siemens, its SGT-800 gas turbine fits squarely in that range. Increasing interest in industrial gas turbines has led manufacturers to invest in design improvements. New coatings, advanced cooling technologies, and additive manufacturing have spurred significant efficiency gains. Since 2015, the SGT-800’s efficiency has improved from about 56% to 58.6% in combined cycle mode, which makes it the market leader in efficiency for its power band, according to Lengel. Flexibility has also made these mid-size gas turbines popular. Rather than constructing a single large gas turbine unit, many companies are deciding to install multiple smaller units at sites. “We actually have a six on one that’s actually under construction right now,” Lengel said. (Six on one refers to an arrangement in which six gas turbines and six heat recovery steam generators are joined with one steam turbine in a combined cycle configuration.) “That’s a project that’s down in Panama,” he said. Industrial gas turbines are also good candidates for combined heat and power applications. Lengel mentioned the Holland Energy Park in Holland, Michigan—a POWER Top Plant in 2018—as a shining example of a plant that utilizes SGT-800 gas turbines for more than just generating electricity. That facility also provides heat for a snow-melt system that keeps downtown city walkways ice-free during the winter. Although Lengel said there were only 14 SGT-800 units currently operating in the U.S., it's a well-proven model around the world. “With the changes that are being seen, and I think the desire for more smaller units and distributed generation,” he said, “I think that’s only going to increase.” When asked what sectors would be the biggest buyers of industrial gas turbines going forward, Lengel said, “Looking at some of the numbers, even from the [Energy Information Administration’s] latest energy outlook that they put in just a couple months ago, the bulk chemical [industry] actually is looking to increase pretty significantly in their power needs, and more specifically, on onsite generation. So, that's one specific area that really could see some growth—in the U.S. in particular—for onsite power generation combined heat and power application.”

Control Your Own Destiny with Combined Heat and Power Systems Combined heat and power (CHP), also known as cogeneration, is the concurrent production of electricity or mechanical power and useful thermal energy (heating and/or cooling) from a single source of energy. Although it may not be widely recognized outside of industrial, commercial, institutional, and utility circles, CHP has been providing highly efficient electricity and process heat to some of the most vital industries, urban centers, and campuses in the U.S. for more than a century. In fact, Thomas Edison’s Pearl Street Station was a CHP facility when it opened in 1882—the same year POWER was first published. According to the Department of Energy, most CHP applications can reasonably expect to operate at greater than 65% efficiency, a large improvement over the typical electric-only power plant. President Obama believed so strongly in the benefits that he signed an executive order on August 30, 2012, establishing a national goal of adding 40 GW of new CHP capacity by 2020. However, the country will fall well short of that target; only 2.5 GW was added between 2012 and 2016. Bill Castor, director of business development for Siemens Energy, was a guest on The POWER Podcast. Castor gave a presentation titled “Navigating Through the Challenges of Implementing Successful Onsite Generation Solutions in a Complex Market” on April 25 during the ELECTRIC POWER Conference and Exhibition in Las Vegas, Nevada. He touched on some of the main points from his presentation during the podcast interview. “CHP is an entirely different animal than your typical power plant because it is so intertwined with the end user—the host—as well as impacted by the outside grid,” Castor said. He noted that CHP results in not only reliability gains, efficiency gains, and environmental gains, but it also allows end users to take control of their own destinies. “Controlling your own destiny is one of the phrases that really is attached to CHP as a driver for the potential hosts of those units,” Castor said. “The whole story for CHP has to start though with the end user,” Castor said. “You need to have that thermal host in order to make [CHP] a sensible alternative.” Castor noted that industrial solutions come in a variety of shapes and sizes. Systems range from small to large, and can utilize an assortment of technologies including gas turbines, reciprocating engines, and fuel cells, as well as incorporating control systems, electrical systems, transformers, and more. “Utilities in the past have traditionally resisted CHP coming because it tends to take large customers away from the utility,” Castor said. But that is changing. “Many of the cases that we’re looking at today involve either utility ownership and operation or at least a cooperation between the host and the utility to try to make those work,” he said.

Working with Peers Is Critical to Power System Reliability. When conversations around the power industry turn to computer hacking, more often than not experts say it’s not a question of if, but rather, how systems have been compromised. William Doering, adjunct professor in the John E. Simon School of Business at Maryville University and a director with Guidehouse—a management consulting services provider—said he has participated in various discussions on how to cleanse infection and how to ensure reliability after the fact. Speaking on The POWER Podcast, Doering said the Stuxnet computer worm and the Ukraine power grid cyberattack in 2015 should provide more than enough evidence that systems are vulnerable. “For us to think that something like that hasn’t happened yet [in the U.S.] is definitely on the riskier side of optimistic,” Doering said. “I think the level of sophistication that state-level actors provide is in many cases astounding,” he said. But even more worrisome to Doering is the fact that state-level-actor tools, which are extremely sophisticated, complex, and devastating, have been released and are now in the hands of the broader masses. “The level of disruption is really hard to gauge,” Doering said. “Building microgrids around critical infrastructure where they have the ability to do generation plus storage, and I’m not saying that that’s the only answer but … a combined portfolio of solutions, I think, provides a lot of resilience.” Doering also touched on the risks presented by electromagnetic pulse and geomagnetic disturbance events, suggesting that a combined effort is needed to harden the system. “If you have limited resources on how to prepare, selecting the appropriate level of preparation is crucial,” he said. “I don’t think any utility or even a government actor has the ability to do all of the things [necessary], so I think instead what we do is try to prioritize and understand, ‘Where do our limited resources bear the most fruit?’ ” “For me, the place where I see the most value put in is the information sharing,” Doering said. “Always be learning, always be working with your peers, be working with your vendors, identifying situations where the first thing that we need to do is question our assumptions.”

Trump Ended War on Fossil Fuels, but Focus Needed on CCS. The United States Energy Association (USEA) is an association of public and private energy-related organizations, corporations, and government agencies that helps increase understanding of the world’s energy issues. Barry Worthington has been the executive director of the USEA for more than 30 years. During that time, he has seen the association grow from a two-person, $200,000-a-year operation to an organization with 25 employees and a $10 million budget. Worthington was a guest on The POWER Podcast. He spoke about some of his group’s accomplishments over the years and explained what the USEA is concentrating on currently. “I think right now that the most important technology that we need to focus on where we’re not adequately focusing is carbon capture utilization and storage,” he said. Worthington believes people around the world are going to continue using fossil fuels for many, many years. Even if developed nations such as the U.S. and some European countries cut back on fossil fuels, places like China, India, Vietnam, Indonesia, and many others are going to continue to burn coal, Worthington said. “I feel that we have an obligation to help them do that in a manner that’s using the best technology—low-emission, high-efficiency technologies. If we have any hope of meeting our climate change goals, we need to be deploying CCS [carbon capture and storage] much more rapidly than what we are now,” he said. What’s holding CCS back, according to Worthington, is that the U.S. hasn’t established economic incentives to help support the technology. For perspective, he compared federal spending on renewables to that spent on CCS. “The ratio is 100 to 1,” Worthington said. “For every dollar the federal government spends on CCS, they spend $100 on renewable incentives. And the consequence or outcome of that is you’ve seen a dramatic, dramatic reduction in the cost of wind and the cost of solar, but you haven’t seen anywhere near the dramatic cost reduction in CCS. Yet, the potentials are there.” But Worthington was optimistic about what the government has been doing. He suggested the most important message the Trump administration has delivered to the energy sector is that the war on fossil fuels is over. “We went through eight years where fossil fuels were vilified as opposed to applauded. Fossil fuels have been the cornerstone of economic development all throughout the world ever since the industrial revolution. They continue to provide about 80% of primary energy supply on a global basis and we have unleashed—the administration has unleased—the fossil fuel industry,” he said. Worthington noted that the message is a marked change from the one sent by the Obama administration. “This is just a complete about-face, where you had individuals and departments within the federal government that literally—without exaggeration—literally wouldn’t use the word fossil fuels. It was like they were banned for eight years,” he said. “I think that the Trump administration turning that around and all of the ramifications that fall out of that policy decision are very profound, and I would go so far as to say we’re just now beginning to understand what kind of geopolitical value this about-face can do for the country,” Worthington said. During the interview, Worthington also touched on takeaways from the USEA’s inaugural Energy Efficiency and Supply Forum, the integration of renewables into the grid, the trajectory for electric vehicles, climate change, sustainability, the efficient use of fossil fuels, and more.

How a Major Resort Owner Manages Its Power. MGM Resorts International took a bold step in 2016 when it ended its energy-buying relationship with NV Energy and instead chose to purchase electricity from private providers. The company’s decision was driven by a desire to slash bills and boost renewables. Henry Shields, executive director of finance and analysis in the Corporate Sustainability division of MGM Resorts International, was a guest on The POWER Podcast. Shields will be a keynote presenter at the ELECTRIC POWER Conference and Exhibition, which will be held at The Mirage Events Center in Las Vegas, Nevada, April 23–26, 2019. On the podcast, Shields explained how the changes played out in practice. “Nevada’s not a deregulated state in the purest sense,” Shields said. “However, there’s been a law in Nevada on a very limited path for certain sophisticated commercial customers to do what we did.” “What we did was separate from the utility in terms of the actual procurement of electricity so that we were able to source our power from the wider market. We do remain actively—and will so in the future—very much a customer of NV Energy, but now for local lines and wires, and transmission service only,” Shields said. Concerning renewable energy, MGM Resorts International has really embraced solar power. Even before it broke away from NV Energy, MGM installed more than 26,000 photovoltaic (PV) panels on its Mandalay Bay Convention Center—about 28 acres of rooftop area. Furthermore, in April 2018, the company announced it was partnering with Chicago-based Invenergy, North America’s largest independent renewable energy company, to construct a solar project about 25 miles north of Las Vegas. At full production, the 100-MW solar array is expected to provide up to 90% of the total daytime power needs for MGM Resorts’ 13 Las Vegas Strip locations. Shields said the project would go a long way toward meeting the company’s published goal of reducing its carbon intensity by 50% by 2030.

Royce Peters, senior technical coordinator for the Carpenters International Training Center (ITC) in Las Vegas, Nevada, was a guest on The POWER Podcast. The ITC is the largest and most-comprehensive training facility of its kind in the world. Following the completion of phase six of construction in 2018, the center now has more than 1.2 million square feet under-roof. Peters listed some of the unique training tools available at the facility, including a Frame 7 gas turbine, a 64-MW steam turbine, eight overhead bridge cranes, and a 16,000-gallon underwater-welding dive tank, among other things. The facility is one of the largest publishers of technical training materials in the world, with more than 120 books created and more under development. The Carpenters International Training Fund and its affiliated funds invest more than $200 million a year to develop and deliver training, enhance knowledge and skill sets, and create new opportunities for United Brotherhood of Carpenters and Joiners of America (UBC) members. Outreach programs include Career Connections, which targets high schoolers and inner-city residents, among others, with training leading to a career in the industry, and Helmets to Hardhats, which gives military members the opportunity to transition more easily to the civilian workforce. But people interested in joining the UBC don’t have to go through one of the outreach programs, anyone can apply by contacting their nearest regional council office. There’s a lot of see at the ITC and the ELECTRIC POWER Conference and Exhibition is making it possible by offering a tour of the facility as an option for attendees. To learn more and to register for the event, which will be held April 23–26, 2019, at The Mirage Events Center in Las Vegas, visit: https://2019.electricpowerexpo.com/.

Carol Holahan, counsel in Foley Hoag’s Energy & Cleantech practice, was a guest on The POWER Podcast. Holahan advises large regional generators and other participants in the wholesale and retail competitive electricity markets on policy initiatives, changing environmental regulations, decommissioning and sale of plants, and matters pending before the Federal Energy Regulatory Commission (FERC). During her interview, Holahan explained some of the differences between natural gas pipeline and bulk power system cybersecurity requirements. Currently, the Transportation Security Administration (TSA) is responsible for oversight of the gas pipeline system. Holahan said the U.S. system comprises a 2.7 million-mile network. Yet, according to a letter written by two FERC commissioners last year, TSA has only six employees dedicated to pipeline oversight. Furthermore, TSA has no mandatory compliance or reporting requirements, and relies on companies basically self-reporting, especially with respect to cybersecurity events. Oversight of the U.S. bulk power system is markedly different. It is mandatory and quite complicated, with FERC, the North American Electric Reliability Corp. (NERC), the Department of Homeland Security, and the Department of Energy (DOE) all involved in some aspect of oversight. The disparity between the requirements for gas and electric infrastructure, combined with a computer hacking event last year that affected multiple pipeline companies, led two FERC commissioners—one Democrat and one Republican—to write a joint letter urging the transfer of gas pipeline oversight to the DOE. To date, changes in the oversight structure are still being debated in Washington with no clear resolution in sight. While cybersecurity is easy to neglect, Holahan said a recent $10 million fine issued by NERC against an unnamed power company for alleged cybersecurity violations sent a very clear message to all U.S. utilities subject to NERC requirements: “If you had not been paying attention to cybersecurity to date, you better start.” Holahan touched on the changing landscape of power generation. She noted that Brayton Point—the last big coal-fired power plant in New England—was retired last year and Pilgrim nuclear plant will be shuttered this year, removing hundreds of MW from the grid. What’s coming online is new gas, solar, and wind generation, including the promise of more offshore wind. Pairing battery storage with renewables is allowing intermittent resources to participate in the market as baseload power. While noting that FERC has traditionally operated above the political fray, Holahan said there is some concern that the DOE will continue to exert pressure on the agency to provide relief for certain types of units, especially coal-fired plants. Furthermore, Holahan thinks it will be interesting to see how FERC responds to various state policies that support certain resources, such as nuclear and renewables. “I think it will be well worth watching what models FERC is going to approve that will allow these resources to participate without compromising price formation or market entry and exit signals.” she said.

Prepare for More Distributed Energy Resources. Paul DeCotis, senior director in West Monroe Partners’ Energy and Utilities practice, was a guest on The POWER Podcast. West Monroe, in partnership with Greentech Media, conducted a survey of more than 1,700 utility customers, 140 utility executives and managers, and more than two dozen regulators in major markets across North America. Its findings were released in a report titled Planning for a Distributed Energy Future. Interestingly, 92% of survey respondents said they had distributed energy resources (DERs) on their system, up from 80% when the survey was conducted three years ago. However, DeCotis noted during the podcast that DERs are not yet universally economical throughout the U.S. “Not all states and regulatory jurisdictions handle DERs the same. It’ll be a few years before we see very significant DER penetrations uniformly across the country,” DeCotis said. “DERs still need substantial backup generation because utilities have the obligation to serve load and be the provider of last resort, so the industry will develop cautiously in some parts of the country until regulations become more certain and incentives become more mature,” he added. The report notes that distributed energy resource management system (DERMS) technology is on many utilities’ radar, but more than half of respondents said they had no concrete plans to invest in it. “As the system gets more distributed, [utilities] do need a way to have visibility and to manage that system so that they can be the provider of last resort,” DeCotis said. Therefore, DERMS technology will continue to become more and more important as DERs are added to the grid.

Community Solar Power Offers the ‘Best of Both Worlds.’ Laura Stern, co-founder and president of Nautilus Solar Energy, was a guest on The POWER Podcast. Founded in 2006, Nautilus is a leading acquirer, developer, and operator of community solar projects. During the past five months, the company has acquired community solar projects in Minnesota, Massachusetts, New York, Maryland, and Rhode Island. Community solar refers to local solar facilities shared by multiple community subscribers who receive credit on their electricity bills for their share of the power produced. This solar power model is being rapidly adopted throughout the U.S. According to the Solar Energy Industries Association—the national trade association of the U.S. solar energy industry—there was 1,294 MW of installed community solar capacity at the end of June 2018, with at least one community solar project online in 42 states. Furthermore, the group says the market will add as much as 3 GW over the next several years. Community solar allows homeowners, renters, and businesses to have equal access to the economic and environmental benefits of solar energy generation regardless of the physical attributes or ownership of their homes or businesses. It’s particularly beneficial for low-to-moderate income customers most affected by a lack of access, and it helps build a stronger, more-distributed and -resilient electric grid. “It’s kind of the best of both worlds,” Stern said. “It is the best physical configuration of a solar plant, and it’s the best kind of off-take in terms of diversifying your risk among a number of subscribers, not being captive to an on-site customer, and being able to update that list of customers as your project advances.”