So successful has the state’s switch to renewable energy been that at times the small island grid systems are creating too much energy, or conversely, others are generating too little. Unfortunately, the significant swings in power supply cause enormous system management problems. Hawaii is not alone of course, the islands display a microcosm of what most countries with a significant proportion of renewable power generation suffer: coping with the variability of renewable power supply.
The Smaller the Grid, the Bigger the Shifts
According to the WSJ, though, the smaller the grid the harder it is to manage and they don’t get much smaller than Hawaii’s. Every island has its own grid, none of them connected to any other, compared to the US mainland where just three grids cover 48 states.
The larger the grid, the more capacity it has to absorb fluctuations in power levels. The islands still burn oil for 70% of their power pushing power costs to 34 cents per kilowatt-hour; as a result there has been a massive adoption of solar panels and wind turbines. On Oahu 13% of residential utility customers have solar panels, unprecedented in the US, even compared to green California or super sunny Arizona.
Source: Wall Street Journal
In Hawaii, at any time, up to a third of power could be coming from renewables. If a cloud passes, power levels fluctuate significantly. On Maui, the WSJ reports peak electricity demand is about 200 megawatts. The island has 150 megawatts of renewable capacity, half of it consisting of wind turbines. That means sometimes as much as 75% of power generated comes from variable sources like the wind and sun. Read more
The job of 3D-printing the world’s first office building is being tackled and 27 states have filed a lawsuit against the EPA over new water rules.
3D-Printed Office Building
Plans have been made to 3D-print a 2,000-square-foot office building – along with the furniture for its clients. Shanghai design company Winsun Global will work with architecture firm Gensler, structural engineer Thornton Tomasetti and construction manager Syska Hennessy Group on the project and plans to use reinforced concrete, fiber-reinforced plastic and glass-fiber-reinforced gypsum in a 20-foot-tall 3D printer. The project should require up to 80% less labor and could reduce construction waste by as much as 60%.
Several lawsuits have been filed by 27 states against the Environmental Protection Agency‘s expanded water rules. The states are concerned that the EPA violated the Clean Water Act and other laws when it extended its authority. The separate suits are expected to be combined into one case in federal court.
A steelworkers’ strike looms in the UK while India expands its lead in the world’s largest big economy title race.
UK Workers Authorize Strike against Tata
Shares of Tata Steel fell over 2% on international exchanges after UK unions notified the company that they planned to strike on June 22 over the firm’s proposal to revise the British Steel Pension Scheme (BSPS).
In a filing on June 10, the firm said: “Tata Steel UK (indirect subsidiary of Tata Steel Ltd.) has now been notified by the four unions (Community, GMB, Ucatt and Unite) of their plans to take industrial action in dispute over the company’s proposal to revise the BSPS’ contribution and benefits framework.”
Tata Steel employs more than 17,000 workers at four sites across Wales in Port Talbot, Newport, Flintshire and Carmarthenshire, as well as sites around England including Corby, Hartlepool, Rotherham, Scunthorpe, Teesside and York.
India Will Keep Fastest Growing Big Economy Title
India will continue to be the world’s fastest growing big economy and expand its lead on China over the next two years, the World Bank said Wednesday.
The bank expects global growth to slow this year, only to rebound next year. However, it expects India’s gross domestic product expansion to accelerate to 7.4% this calendar year, 7.8% next year and 8.0% in 2017.
Over the same three years, the multilateral lender predicts China’s growth to slow from 7.1% this year to 7.0% in 2016 and 6.9% the year after that.
In the first half of our conversation with Michael Whatley, policy advisor to Consumer Energy Alliance, we touched on the issues that EPA’s Clean Power Plan, which aims to regulate existing power plants across the country, poses to US manufacturing sector, such as singling out coal-fired electricity generating capacity, grid parity, and some ‘cap and trade’-like effects.
In this second half, we touch on how the major utilities are looking at the rule, what the “European experiment” has taught us, and, in hindsight, what kind of cost/benefit analysis would be helpful if EPA were to get a “do-over” in proposing this rule.
Utilities and EPA Clean Power Plan
MetalMiner: Let’s talk about some of the energy producers, such as Exelon, ComEd, or Duke Energy. What’s their point of view on the EPA Clean Power Plan? What types of approaches, if any, are they taking at this point?
Michael Whatley: These proposed rules are going to require a certain percent of carbon reductions or carbon intensity in each individual state. [We haven’t] seen a lot of the utilities come out and say, ‘we really like these or we really don’t like these,’ because I think that at this point in time, the vast majority of the utilities are looking at it and saying what does this mean, and how are we going to apply it, and what are we going to do? At the end of the day, if you think about the utilities, their major role, according to state law and certainly any federal overlay on it, is to be able to provide reliable electricity for the consumers. A lot of states require that the utilities not only be reliable, but also to be the most cost-efficient that they can within the various rules that are out there. At this point, there really is just a lot of data-gathering assessment that’s going on from the utility world that is looking at the proposed rule going forward.
MM: If the rule goes into effect largely as is – which is a big if – how do you think about the cost impact of this new regulation on US manufacturing? What’s the benchmark of how you measure that?
MW: Consumer Energy Alliance released a study that we put together in conjunction with a number of other groups that looked at what are the potential ramifications of the rule as proposed. And the numbers were fairly staggering. You’re talking about, nationally, a 12% to 17% increase in electricity prices, which could be as much as $41 billion dollars annually. And those are costs that are going to have to be borne by energy consumers. In terms of whether EPA wants to implement rules to ensure that there’s no new coal-fired power plants, there’s probably a way that you could do that in a cost-effective way that’s not going to cause these types of price spikes. The same thing applies with rules on existing coal-fired power plants. If you’re going to phase them out, you have to be able to give utilities and states realistic timelines and opportunities to be able to replace that electricity [capacity]. What EPA has done is come in and say, no, we’re going to have to achieve these cuts. And you’re going to have to use these mechanisms. And you’re going to have very, very tight timelines that you’re going to be able to do it. So we were not really surprised but awfully disappointed with the numbers that we saw in that study.
MM: Would the problems be solved if the timelines were all extended?
MW: I think it’s a combination of both timeline and reduction goals, because if what you’re saying is that you have to reduce carbon intensity by 5% in a state, given these timelines, that could probably work. If you’re going to say you have to reduce it by 20%, but you give companies 15 to 20 years instead of five to 10, then that can probably work. But the combination that we see in this rule of the timelines and the reductions is going to be particularly difficult … It puts the onus back on the states.
“War” on Coal?
MM: Another criticism of the plan that we’ve heard is that some feel that this rule is starting with coal. And it’s a slippery slope. Perhaps we’re going to suddenly find that these rules extend to other power sources. What are your thoughts on that?
MW: We completely agree. We work with the natural gas producers and suppliers all day, every day. The simple fact of the matter is you look at a state like Virginia, where we did a back-of-the-envelope analysis that said if you eliminate every coal-fired power plant and replace it with natural gas, you’re still probably not going to be able to hit these targets. So it really is going to be that you have to bring online new nuclear. And again, the timelines that they’ve put in place don’t allow for new nuclear. They also have a problem that in South Carolina and Georgia where you do have new nuclear facilities that are already under construction and going to be online over the next several years, those will not count towards the reduction capacity, even if they phase out coal, because they’ve already broken ground on those facilities. You have to bring online new renewables in order to get that zero generation capacity. Every state’s going to have to do its own analysis. And that certainly cannot be done on the back of the envelope when you’re talking about long-term electricity programs and plans. So we do feel that this is not just an attack on coal. It really is a program that is going to, ultimately, shake up the entire electricity generation capacity in the country. So as electricity users, that’s why we have this particular concern. There’s a lot of things [to suggest] that EPA clearly is trying to get the states to participate in cap and trade programs and to put in place statewide renewable electricity mandates, which would be the only way that they would be able to meet these goals.
MM: Speaking of cap and trade, just looking at the European experiment, how do you look at what’s going on in Europe comparatively? And what are the lessons learned, or the examples, you look at?
MW: I think the lessons learned are that if you’re going to look at a complex system that’s got a bunch of different moving parts, and a bunch of different fuels that are in the mix, and say, unilaterally, we’re going to take any one of them off the grid and we’re going to do that with unrealistic timelines, then you’re setting yourself up for failure. You know, you look at what happened in Germany where they had a plan to take offline all of the coal. That, in and of itself, was causing tremendous problems in terms of reliability and cost for the consumers. Then after Fukushima, they unilaterally in a knee-jerk fashion said we’re going to take nuclear offline as well. Well, they were able to take the nuclear offline. They shut it down. The problem is that they’re importing electricity generated from coal. And they’re turning their coal-fired power plants back on, which means that their overall carbon emissions are actually going to go up. So I think when you’re talking about establishing a carbon policy, that needs to be done holistically to ensure that we provide electricity for the consumers affordably and reliably.
If EPA Could Have Done It Right…
MM: If you were sitting at the head of the EPA, what type of cost/benefit analysis – or any other kind of analysis – would you do if you were going to try to still tackle this issue without doing it the way they did it?
MW: If you’re going to have a carbon reduction program, and that’s clearly where EPA is going with this, you’ve got to take a look at what are the opportunities that we have has a country to be able to reduce carbon emissions. And the electricity sector is certainly going to be a key component of that. But it’s not the only component of that. Then you have to be able to say, OK, well given our current fleet mix, what are the steps that we can do proactively going forward over a realistic set of timelines to be able to reduce that? If we can reduce carbon emissions from coal-fired power plants by 20%, 25%, or 30% by using new coal-fired power technologies that have been created that are online right now in different facilities around the country and world, why would we not want to explore that instead of unilaterally saying coal is the enemy? We also need to be able to allow for the construction of new nuclear facilities. We need to be able to set it up so that new natural gas baseload facilities, which are new, are going to have the time to get online, that we’ve got the capacity to build pipeline that will get us from the natural gas reserves to these particular facilities, and that you’ve got to be able to work with the states in a much, much more flexible way to allow them to set up the electricity regimes within their individual states. But coming out and saying that we’re going to have a very strict set of timelines, a very strict set of carbon reduction goals, and not give the states any flexibility in terms of how they’re going to get there is not the right way to go about it.
MM: Do you think the EPA will pay attention to those two factors and make some changes in those goals?
MW: We do. You know, what we’re hearing from several states that we’ve been in meetings with, whether it’s with their governors or with their environmental regulators or even their public service commissioner or public utility commission staffs, is that they’re in the process of negotiating and working through these proposed rules with EPA. We hope that as EPA goes through this and they hear from the public, they hear comments from utilities, and from rural electric co-ops, for example, as well as the manufacturers and other consumers like us, that they’ll make sure that this program has enough flexibility in it. Whether it’s through a combination of flexibility on the goals, flexibility on the timelines or both, that we can get there without having price spikes and blackouts.
We at MetalMiner have long covered the US domestic policy front as pertains to US manufacturing industries, and time and again, we hear industry experts extolling the virtues of “all-of-the-above” strategies, rather than unilateral regulatory decrees.
So is the federal government, in conjunction with individual states, pursuing “all-of-the-above” strategies to their fullest potential when it comes to US energy policy?
As the final rule of the EPA Clean Power Plan gets closer to being finalized (word on the street: it’s happening this summer), we got an insider perspective from Michael Whatley at Consumer Energy Alliance on the issues for US manufacturers surrounding the potential effects of the final rule. Below is a condensed and edited version of our conversation.
All-of-the-Above Fuel Mix
MetalMiner: So when we talked to AISI and NAM, there was sort of like this clear-cut division. There [seem to have] been trust issues between EPA and industry. Are you guys in the same boat as that?
Michael Whatley: We feel very strongly that we’ve seen rules that have been put in place over the last 15 to 20 years across multiple presidencies that are reducing the role that coal is going to play in the nation’s energy power supply. But at the end of the day, in order to ensure that we have affordable, reliable electricity for all of our consumers, whether those are industrial or individual and residential, we have to make sure that we have a fleet mix – a generation mix – for electricity that is going to work. If we’re going to say unilaterally, the way that this administration’s EPA has said, that we’re going to move away from coal, then we…can’t just take 30 or 40% of our power supply of the grid in a short period of time without having ramifications. Electricity [demand], over the long haul, is projected to increase across the country. So if we’re going to be making major changes to our fuel mix, we’ve got to make sure that we’re able to replace the coal if the coal is going to go away. And in this short of a time, we just don’t think that’s realistic.
MM: Is that what you mean by fleet mix? Does that have a different meaning than the fuel mix?
MW: No, fleet mix is the fuel mix. Frankly, as much as we support solar and wind and other renewables, those are not ready to take on a baseline generation capacity in most states yet. Even though we have natural gas that is online and have massive reserves nationwide, the infrastructure to be able to get the natural gas from those reserves to new electricity plants that are yet to be built, as well as the pipeline capacity, is going to be a challenge for us. We have to make sure that the timelines EPA puts in place for the states here are going to be realistic.
MM: So what are you guys advocating at CEA?
MW: We are advocating that if we’re going to move forward with any set of rules, they have to be done in a way that is not going to set up unrealistic emissions generation cuts or unrealistic timelines, because we can’t do this in a way that’s going to foster blackouts or price spikes, as we’ve seen in some states already. In California, that state has taken steps to say “we’re not going to have any coal-fired power plants.” Yet, they import electricity from a bunch of other states. If you take that same model and apply it nationally, then we’re not going to be able to get enough renewables online in the timelines they’re talking about. Read more
We have already written this year on the risk to the fossil fuel industry posed by potential carbon taxes. Consensus that such taxes are coming seems to be building surprisingly quickly, helped, it must be said, by a historic agreement between the USA and China to work together to agree on emission targets and add momentum for an agreement to emerge from the COPS21 conference planned in December in Paris.
The most noise is, not surprisingly, coming from fear that trillions of investments in fossil fuels, principally coal but also oil and even natural gas, could become uneconomic if some form of carbon tax is agreed upon. Probably more because of this worry than any more altruistic notion major investors are already beginning to turn their backs on coal in particular. The latest is the world’s largest sovereign wealth fund, Norway’s $916 billion fund has decided this week to pull any investments from companies whose business relies more than 30% on coal according to the FT. Read more
Rules and regulatory compliance already got ya down? Well, another rule’s comin’…(check out the video above for a preview.)
The final rule of EPA’s Clean Power Plan, set to go into effect mid-summer 2015, will likely have significant financial implications for US manufacturers. The potential cost, supported by several independent third-party studies, could be far below the original estimates put forth by the EPA. This has led to great cause for concern among domestic manufacturers as they already struggle to compete with international companies who, in many cases, receive heavily subsidized energy.
So what are US manufacturers to do? Stay tuned for “What EPA’s Clean Power Plan Could Cost US Businesses (and What Procurement Can Do About It)”. This 45-minute interactive video presentation, with Q&A session following, will feature:
Lisa Reisman, CEO, Azul Partners and Executive Editor, MetalMiner™
Ross Eisenberg, Vice President, Energy and Resources Policy at National Association of Manufacturers (NAM)
Mark Pruitt, Principal, Power Bureau
Jennifer Diggins, Director, Public Affairs, Nucor Corp.
What You’ll Learn About EPA’s Clean Power Plan
What the actual proposed rule entails
How manufacturers, including those in the steel industry, view the plan and its potential effects
How a typical steel cost breakdown could change
The roles volatility and grid reliability play
How purchasing / procurement professionals can best prepare themselves for regulatory compliance
Need CEH credit? Attending this webinar will count toward 1 CEH from ISM.
The American Iron and Steel Institute (AISI) 2015 General Meeting closed just yesterday here in Chicago, where steel industry folks on the producer and service center sides (to name a couple) came together to discuss key issues surrounding the US steel market landscape, while leaving a crucial issue explicitly unmentioned – but we’ll get to that in a bit.
Of course, we can’t really forget China. Nucor Corp. CEO John Ferriola was joined by AK Steel CFO/SVP Finance Roger Newport; Regulo Salinas, vice president at Ternium Mexico SA, Jim Baske, CEO ArcelorMittal North America Flat-Rolled, Chuck Schmitt, EVP and head of SSAB Americas and AISI President and CEO Thomas J. Gibson in creating a united front “in the call for a flattened playing field between US producers and foreign companies exporting to our shores, particularly those from China,” according to my colleague Jeff Yoders, who covered AISI’s press briefing at the Fairmont Hotel on Monday.
Ferriola said 4 million people whose livelihoods depend on the steel industry are at risk, but also that enforcing existing trade and anti-dumping laws consistently would make a wealth of difference for today’s producers, as Jeff wrote in his dispatch. “The first step is enforcing existing law as written,” he said at the briefing. “Legally and consistently enforcing the laws on the books would help immensely… The American worker is still the most efficient worker in the world. We have relatively inexpensive energy, we have the raw material available, we have the best market in the world. When you look at those natural advantages, it makes no sense we should be operating at 60-70% capacity while the rest of the world is overproducing.”
While Ferriola’s right on all the above, let’s home in on one phrase in the above quote: “We have relatively inexpensive energy.”
It’s true that the US is in a unique position as far as access to energy and reasonable pricing go…for now. However, the pricing part may soon change. How?
Energy Prices and Regulation in the United States
Natural gas prices, electricity prices and US steel production are all in bed together, loosely speaking, and it’s increasingly hard for one to get out from under the warm covers without disturbing the others.
There has been a lot of attention recently to the longer term viability of global fossil fuel reserves. Due to the fall in oil, natural gas and coal prices, the FT reports this week that all the oil majors have slipped into loss as a result of of the low oil and natural gas prices.
That’s not the reason for the viability questions, though, that attention is due more as a result of future climate change legislation raising the cost of carbon-based fuels. Another article leads with comments made by GlencorePlc’s chief executive, Ivan Glasenberg, in the company’s recent sustainability report.
Reacting to investor concerns (not just at Glencore but at all energy companies) he is quoted as saying “Although climate change issues are part of the political, societal and regulatory landscape, we do not believe that the global energy reality will economically support carbon measures that would prevent us from fully utilizing our fossil fuel reserves.”
In essence, what he is saying is a middle way will have to be found between reducing CO2 release and continuing to provide energy at an economically viable cost. Some investors have taken what they see as a moral stand such as the Church of England who have sold their investments in coal mines.
Others, like the heirs to the Rockefeller family and Stanford University are getting out more on economic grounds fearing assets will be “unburnable” if the world is to keep the rise in global warming below 2%. Some scientists have estimated that 80% of the world’s coal will never be mined if this objective is to be met, although it has to be said this does not account for the possibility that technology will ride to our rescue.
Humans do have a habit of coming up with technological developments to overcome challenges. Economically viable carbon sequestration for example could make coal viable even in a world demanding near-zero release of CO2 into the atmosphere. As the article points out, many energy companies appear to cling to the belief their assets will be in the economically recoverable 20% rather than the unrecoverable 80% – which clearly they cant all be.
Although Glencore has major exposure to the sector – they are the world’s largest seaborne coal shipper – they can viably argue theirs are among the lowest-cost and they are more likely than most to be the last coal man standing, and still turning a profit come what may.
Much will hinge on the outcome of this December’s climate change conference taking place in Paris, it is hoped the UNFCCC will achieve consensus among polluters on binding targets. Optimistically, by the end of the meeting, it is intended that all the nations of the world, including the biggest emitters of greenhouse gases, will be bound by a universal agreement on climate.
The chances of success in this respect were increased late last year when China and the USA reached a breakthrough agreement to reduce CO2 emissions. Notably the USA committed to cut carbon emissions 26% and 28% on 2005 levels by 2025 – a marked acceleration of its existing goal to reduce emissions by 17%.
China said it “intends” to start cutting carbon emissions in 2030 and make “best efforts” to peak emissions before 2030. It also agreed to increase the share of non-fossil fuels energy consumption to around 20% by 2030, a target it is already on its way to achieving as the world’s biggest investor in renewable energy.
As the world’s two biggest polluters, it was crucial that these two countries should be on board if the conference in Paris was to have any chance of success. It now looks more likely that binding targets will be agreed and as a consequence policy changes will develop over the next few years that could raise the cost of carbon and make existing fuels less viable.
Whether you agree with the climate change argument or not is irrelevant, the impact on you, your business and society will happen regardless. Fossil fuel resource companies are therefore looking at their position on the cost curve and, regardless of what is being said in public, you can bet it takes up board time.
Which almost as a postscript raises a question: if governments are serious about limiting a rise in global warming by reducing carbon dioxide emissions, surely they would be advised to spend some of the billions they will be raising in carbon taxes and fuel taxes on research into carbon sequestration. If we could economically use that 80%, which some are suggesting may never be burnable, it would keep the lights on for billions in the developed and developing world alike without costing us the planet.
New metal technologies play a key role in all we do here at MetalCrawler and none could be more promising than Tesla Motors‘ line of batteries for the home. The Chinese yuan may also be on the cusp of being declared not manipulated by the International Monetary Fund.
Tesla Home Batteries
The idea is that homes and businesses powered by solar panels could harvest and store energy during the day that could be used to run homes at night, or be used as a backup during a power outage.
Although the exact technology involved in the battery, called Powerwall, is a closely guarded Tesla secret, it probably isn’t based on revolutionary concepts, Jordi Cabana, a chemistry professor at the University of Illinois at Chicago told Live Science. Cabana studies new battery materials and said the batteries look as if they are based on the same lithium-ion batteries in Tesla’s cars.
“Just looking at the specs that they publicize, it doesn’t look very different — in terms of the cost — to what they’re putting in their cars,” Cabana said.
The company is also planning to unveil a business-based battery-storage system, called the Powerpack, though the price for that system has not been released yet. Tesla is already taking orders for its residential system, but the products won’t ship until late summer, company representatives said at the news conference.
IMF Close to Calling Chinese Yuan ‘Not Manipulated’
In what would be a blow to US manufacturers, particularly steelmakers, the International Monetary Fund is close to declaring China’s yuan fairly valued for the first time in more than a decade, according to the Wall Street Journal, a milestone in the country’s efforts to open its economy that would blunt US criticism of Beijing’s currency policy.
The fund’s reassessment of the yuan—set to be made official in IMF reports on China’s economy due out in the coming months—follows years of IMF censure of Beijing’s management of the currency.